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October 29, 2007, 2.36 pm (Singapore time) 
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Dollar plumbs record low as Fed rate cut awaited
The dollar's woes helped drive oil prices to a new record peak above US$93 a barrel and sent gold to a 28-year high near US$793 an ounce boosting the Australian dollar to its highest levels in 23 years and the Canadian dollar to a 33-year peak.
The Fed is widely seen cutting rates by a quarter-point to 4.5 per cent on Wednesday, while expectations are building for a follow-up cut in December to limit economic damage from the housing market's downturn.
The likelihood of lower US benchmark rates sent investors away from US assets and into other currencies, particularly European currencies and those of commodity producers such as the Australian and Canadian dollars.
The euro vaulted to a record high of US$1.4426 on trading platform EBS, the highest since its launch in 1999, before retreating to US$1.4420 up 0.2 per cent from late US trade.
The single currency's jump above US$1.44 triggered a wave of buying orders tied to option positions and sparked broad dollar selling as a result.
The dollar was little changed near 114.20 yen but held off a six-week low of 113.25 yen as market players kept selling the Japanese currency as a source of cheap funds to buy higher-yielding currencies and assets in the risky carry trade.
The dollar's trade-weighted index against six major currencies fell as low as 76.842, an all-time low.
The Australian dollar vaulted as high as US$0.9246 the highest since 1984.
Against the Canadian dollar, the dollar slid as low as C$0.9582 a 33-year low. -- REUTERS
TOKYO - The dollar slid to a record low against a basket of major currencies on Monday, extending its broad sell-off on expectations that the Federal Reserve will trim interest rates this week and possibly again later this year.
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The (US) dollar sank to a new record low against the euro in Asian trade Monday as market players grew increasingly confident about the prospect of another US interest rate cut this week.
The euro hit 1.4426 dollars in Tokyo morning trade, breaking the 1.44 level for the first time since the creation of the single European currency in 1999.
The euro later eased back to 1.4409 dollars, up from 1.4391 dollars in New York on Friday.
The dollar slipped to 114.14 yen from 114.24 yen in New York, while the euro rose to 164.46 yen from 164.37 yen.
"The market is confident about selling the dollar because the Federal Reserve is expected to cut rates again" on Wednesday, said Kenichi Yumoto of Societe Generale.
"The dollar will be under pressure at least until the meeting as we are unlikely to see news that would erase uncertainty over the US economy by then," he said.
The Fed is widely expected to trim its benchmark short-term federal funds rate by a quarter of a percentage point this week after slashing it by a hefty 50 basis points last month.
There has been some speculation the Fed might even lop another half point off the key rate again, but analysts said such a large reduction appeared unlikely this time.
"The Fed is not in a situation that warrants cutting the rate as aggressively as the last time," said Sumitomo Trust Bank forex strategist Saburo Matsumoto.
"As commodities prices are surging ahead, there also are concerns over inflation," which could be fuelled by lower interest rates, Matsumoto said.
The central bank slashed borrowing costs by half a percentage point on Sept 18 to 4.75 percent in the face of the housing slump and a credit crunch that is shaking the financial sector.
Worries about the slowing US economy, especially its housing market, which has been mired in a downturn since early 2006, continue to weigh on the dollar.
The market is waiting anxiously for fresh US data this week, including Friday's monthly labor market report, for fresh clues on the health of the world's largest economy.
The yen was higher against the dollar as players cut back on risky carry trades that involve selling low-return currencies for higher-yielding ones, but it lost ground against the euro, traders said.
"The dollar and yen remained the weak pair of currencies," said Matsumoto.
