Dollar Falls After Bernanke Signals Downside Risks to Growth

The dollar fell to near a record low against the euro after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is likely to ``slow noticeably,'' raising speculation of a third interest-rate cut this year.

The U.S. currency touched the weakest since 1981 versus the pound and the cheapest since 1995 against the Swiss franc as slowing growth dimmed the allure of U.S. assets. The dollar's decline started after the European Central Bank and the Bank of England kept their borrowing costs unchanged today.

``The dollar will continue to lose its appeal,'' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Bernanke's crystal ball is foggy. The growth picture is worrisome and the Fed needs to cut rates further.''

The dollar fell to $1.4691 per euro, from $1.4637 yesterday, at 10:57 a.m. in New York. The dollar touched $1.4731 yesterday, the weakest since the European currency started trading in January 1999. The U.S. currency traded at 112.68 yen from 112.63. The dollar dropped to as low as $2.1117 per pound and 1.1254 Swiss franc. The euro rose 0.4 percent to 165.57 yen.

Brazil's real led the advance among the 16 most-actively traded currencies against the dollar, followed by Norway's krone. Canada's dollar rose 0.5 percent as rising oil and gold prices boost the nation's commodity exports.

The Chinese yuan climbed 0.3 percent to the highest since the central bank ended a decade-long dollar peg in July 2005. Chinese officials yesterday said the country plans to diversify its $1.43 trillion in foreign-exchange reserves, causing a sell- off in the dollar.

The yuan climbed to as high as 7.4211 versus the dollar, from 7.4421 yesterday.
a-taxadvise.com