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U.S. dollar sinks to record low against euro; further decline expected

U.S. dollar sinks to record low against euro; further decline expected

The U.S. dollar plunged to a fresh record low against the euro Thursday amid more glum U.S. economic news and downbeat comments on the outlook from U.S. Federal Reserve chairman Ben Bernanke.
The single European currency jumped to an all-time high of US$1.5229 at one point Thursday. The euro at 5:00 p.m. (U.S. Eastern time) was buying US$1.5197, against US$1.5119 late Wednesday.
The euro broke through the symbolic US$1.50 barrier on Tuesday for the first time since its creation in 1999 and topped US$1.52 for the first time Thursday.
The greenback also sank against the other major currencies, nearing the level of 105 yen.
The U.S. currency remained under pressure as Bernanke testified in Congress for a second day on the central bank's semiannual economic report.
The Fed chief, who gave strong hints of more rate cuts by the central bank, said the U.S. economy faces a different and more complex set of issues than the recession in 2001.
"We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke said.
"Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy."
"Given the dollar's negative near-term fundamentals, we expect it to keep falling for a while yet," said Patrick Fearon, economist at AG Edwards.
But Fearon said the greenback is getting oversold, "and we continue to believe that the dollar could rally temporarily at some point in 2008 if the aggressive monetary and fiscal stimulus policies being put into place in the United States start to boost the U.S. financial markets or slowing economic growth finally prompts substantial rate cuts abroad."
In late New York trade, the U.S. dollar stood at 105.30 yen from 106.45 Wednesday and 1.0512 Swiss francs after 1.0630.
The pound climbed to US$1.9899 from US$1.9815.