Dollar Hits a New Low vs. Euro

Dollar Hits a New Low vs. Euro

By JOANNA SLATER in New York, JOELLEN PERRY in Frankfurt and ALISTAIR MACDONALD in LondonSeptember 13, 2007; Page C14

The dollar hit its lowest mark on record against the euro, as the threat of a U.S. recession sank in among investors around the world.
The U.S. economy's weak state has created a double dose of pressure against the dollar.
Investors have become increasingly convinced that the Federal Reserve will respond to the deteriorating U.S. growth outlook by cutting short-term interest rates when officials meet in Washington next week. Rate cuts reduce returns on U.S. fixed-income investments relative to investments elsewhere in the world.

Moreover, seeing the U.S. growth outlook deteriorate, investors might shift their money to places where the outlook for stock returns is greater.
"The path of least resistance is down for the dollar," says Adnan Akant, a currency specialist at money manager Fischer Francis Trees & Watts. "I don't expect it to turn into a crisis, just a good old-fashioned dollar decline of 5% to 10%."

The weakness could be good news for investors in U.S. stocks with lots of sales overseas -- like McDonald's or Coca-Cola. But it also has its drawbacks, like inflationary pressure and the potential for a drop in foreign appetite for U.S. investments. In Europe, it could hit exports.
Yesterday in New York, one euro hit an intraday high of $1.3914 and finished the session at $1.3906, the European common currency's highest level since its 1999 launch. It was up from $1.3836 a day earlier.

Since the start of this year, the dollar has weakened by 5% against the euro. But the latest slide marks a stark turnaround from the dollar's performance in the past few weeks.