Dollar at record low against euro

The dollar fell to a record low against the euro yesterday on signs that climbing oil prices and a slump in housing are hurting US consumer confidence, bolstering the case for the Federal Reserve to cut interest rates again.

The US currency headed for a third consecutive weekly drop versus the euro on speculation the housing recession will erode corporate earnings. Countrywide Financial Corp, the biggest US mortgage lender, reported its first quarterly loss in 25 years as borrowers defaulted.

"The dollar-negative momentum continues to build up," said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets in Greenwich, Connecticut.

"We had a string of pretty ugly numbers, both from the real economy side and the financial side. That is weighing on the dollar."

The dollar weakened to $1.4383 to the euro yesterday afternoon in New York, from $1.4324 late on Thursday, and touched an all-time low of $1.4393. It has declined against 14 of the 16 major currencies this week.

Dr Dan McLaughlin, chief economist with Bank of Ireland, said he expected two further rate cuts by the Fed in the next six weeks. He predicted "a quarter-point reduction on October 31st, with a similar move at the December 11th meeting."

Oil rose above $92 a barrel for the first time in New York after the US accused Iran's military of supporting terrorism and announced new sanctions on the country that holds the world's second-biggest oil reserves.

"There's nothing out there to stop oil from going to $100," said Chip Hodge, a managing director at MFC Global Investment Management in Boston, which oversees a $4.5 billion oil and gas company bond portfolio.

The US wants Iran to halt uranium enrichment that it suspects is a cover for developing nuclear weapons. Prices also rallied on Turkish warnings of a wider military assault on northern Iraq.

Crude for December delivery rose $1.27, or 1.4 per cent, to $91.73 a barrel at the close of floor trading in New York. Futures climbed to $92.22, the highest since trading began in 1983. Oil is up 52 per cent from a year ago.

Brent crude oil for December settlement rose $1.14, or 1.3 per cent, to $88.62 a barrel on the ICE Futures Europe exchange. Brent reached $89.30, the highest since 1988. - (Bloomberg)