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New Lows for US Dollar Against Euro (March 08)
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Still more trouble for the US economy and implicitly the Canadian economy (and dollar). The US dollar sank to another record low against the euro which appreciated to $1.5302 in afternoon European trading before dropping back slightly to $1.5278. The new low broke through the previous record set march 3 at $1.5275.
Reports in the US show factory demand for products drop sharply in January, while the country's service sector contracted last month. This weakness along with others raised expectations that the U.S. Federal Reserve will continue to cut interest rates.
Speculation has mounted that the Fed might cut rates by as much as three-fourths of a percentage point this month. Lower interest rates can jump-start a nation's economy. But they can also weaken its currency as traders transfer funds to countries where they can earn higher returns.
By contrast, the European Central Bank is expected to leave its benchmark rate unchanged on Thursday at 4 percent following two months of inflation in which inflation has run at 3.2 percent -- well above the bank's stated goal of at or near 2 percent.
Canada cut their interest rate Monday by a quarter of a point.
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Mar 5, 2008, 1:41 PM
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