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The dollar has fallen to a record low against the euro as traders bet that
further interest rate cuts will be needed to stem a US recession.
The euro rose to $1.509 after buying $1.50 on Tuesday for the first time.
Sterling climbed against the greenback too, reaching almost $2.
Lower US rates tend to send investors in search of other currencies which give
a better rate of return.
The view is that UK and eurozone rates will not fall as much as in the US.
The UK pound traded at $1.988 in morning European trade after a raft of gloomy
economic numbers issued on Tuesday.
In addition, Federal Reserve Vice Chairman Donald Kohn suggested that risks of
a cooling economy were overshadowing the worries of rising inflation, hinting
that US rates will be cut below their current level of 3%.
Five-year low
The latest sign of falling US consumer confidence came from the closely-watched
Conference Board survey.
It said consumer sentiment fell to a five-year low in February because of
growing recession fears.
At the same time, the number of US homes facing foreclosure rose 57% in
January, compared with the same month of 2007.
Last month, the Fed slashed interest rates to 3% as it tried to prevent the US
economy falling into recession.
"With so few consumers expecting conditions to turn around in the months ahead,
the outlook for the economy continues to worsen and the risk of a recession
continues to increase," said Lynn Franco, a director of the Conference Board's
consumer research centre.