Dollar reverses fall after euro hits record

Reuters
Saturday November 24, 2007

The euro set a record high against the U.S. dollar early on Friday, but the key $1.50 level remained out of reach and the currency fell back more than a cent on comments from a euro zone policy-maker.

European Central Bank Governing Council member Miguel Angel Fernandez Ordonez said he saw a greater-than-expected economic slowdown in the euro zone and there was not enough data to dispel uncertainty about the effects of financial market turmoil.

Ordonez's comments reminded investors that the fallout from the credit crisis is not limited to the United States, where the fallout has prompted 75 basis points worth of cuts in the fed funds rate since September and helped send the dollar to record lows.

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Moves in currencies were exacerbated by thin liquidity following the Thanksgiving holiday in the United States on Thursday and a Japanese market holiday on Friday.

Ordonez's comments gave some respite to the dollar, which earlier slid to record lows versus the euro, the Swiss franc and a basket of six currencies earlier on Friday, as investors bet that the Federal Reserve will cut rates by at least another 25 basis points at its next meeting on December 11.

However, analysts see few reasons for the resurgence in the dollar to last.

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