The dollar plunged to a new low against the euro, which peaked at $1.6038 in New York trading Tuesday, before recovering throughout the day in New York, as the Euro retreated to $1.5878. The euro’s (15-nation currency) new all-time high against the dollar surpassed its previous record of $1.6018 set on April 22.
The increase came as markets worried about the ongoing U.S. lending crisis and speculation that U.S. banks will report further losses this week, eroding confidence in the financial system of the world's largest economy.
Federal Reserve Chairman Ben Bernanke has become a bit more bearish on the U.S. economy than before. Bernanke told Congress the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions, and sounded another warning that rising prices for energy and food are elevating inflation risks. Over the rest of this year, the economy was predicted to grow considerably below its trend rate, mostly because of continued weakness in housing markets, high energy prices and tight credit conditions. Yesterday regulators announced plans of a rescue for Freddie Mac and Fannie Mae, the two largest buyers of U.S. mortgages.
The Dollar’s fall against Euro means that everything is more expensive for Americans who are traveling in and buying from the Euro zone. On the other hand, the weak dollar means that American goods and services are cheaper for Europeans.
No comments:
Post a Comment