Dollar hits a new low against euro

The dollar plumbed new troughs following an array of weaker-than-expected US economic reports yesterday, hitting fresh lows against the euro and multi-year lows against sterling and the Swiss franc.

The reports on consumer confidence, manufacturing and home sales put the already retreating greenback under additional strain.

"The data seems to fall short of the currency market's expectation that we are always going to get upside surprises [from US economic reports\]," which put some pressure on the dollar, said Ms Lara Rhame, senior economist with Brown Brothers Harriman in New York.

"That consumer confidence was slightly weaker than expected in December confirms to me that retail sales numbers are likely to be lacklustre," she added.

The Conference Board's index of consumer confidence in December was 91.3, slightly undershooting expectations for a reading of 91.5. Existing home sales declined to 6.06 million in November, below economists' forecasts for 6.3 million.

The December National Association of Purchasing Management-Chicago business barometer declined to 59.2, below expectations for 62.2.

Mid-morning in New York, the euro was up 0.3 per cent on the day to $1.2525, after hitting fresh record highs around $1.2530. The dollar hit seven-year lows against the Swiss franc, around 1.2435 francs, before trading at 1.2450 francs and was trading not far above a three-year low on the yen.

Against the yen, the dollar was down 0.1 per cent to 106.92 yen. The pound hit new 11-year highs and was trading up 0.4 per cent at $1.7800.

Earlier, the US dollar took little notice of comments from a Group of Seven (G7) source that the G7 will discuss the dollar's weakness soon. A G7 source told Reuters that finance ministers of the seven wealthy nations will look at the weakened dollar during their February meeting in Florida.

The source also said European nations, in particular, were becoming increasingly concerned about the currency's recent fall. The source said a euro trading higher than $1.20 could not be good for Europe's economy, while a level of $1.30 represented a "pain barrier".

But so far, euro zone officials have appeared relaxed about the rising currency. German manufacturers, who stand to lose the most from a strong domestic currency, also remained optimistic.

Currency investors are on the lookout for any hints that the G7 may express concern about dollar weakness at the upcoming meeting.

But they believed that, until the US expresses concern, European complaints will not get very far as US exporters benefit from a weaker dollar.

"There is no doubt some European politicians and central bankers are concerned about the euro's strength, but I doubt the US will care what the Europeans say. The Germans might want to discuss the euro but it is unlikely the Americans will," said Mr Julian Jessop, chief European economist at Standard Chartered in London.