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Last Updated: Thursday, 18 October 2007, 22:47 GMT 23:47 UK
Dollar plunges to fresh euro low
Money changer exchanges euros for dollars
European exporters are being squeezed by the high euro
The US dollar fell to a new low against the euro after the latest piece of US economic data.

Labour department figures showed the number of people seeking unemployment benefit had leapt by the largest amount since February.

The data boosted expectations that US interest rates could be cut further before the end of the year.

The euro hit a high of $1.4305 on Thursday, before settling at 1.4293 in late US trade.

It broke the previous record, set on 1 October, when one euro bought $1.4282.

Expectation that the US will lower borrowing costs - while intended to boost the economy - can also make the currency less attractive.

The move can act as a brake on investments in the dollar, as investors seek to place their money where deposits can lead to better returns.

Export implications

The labour department figures, which showed an extra 28,000 claims for benefit, came a day after data showing the construction of new homes and apartments in the US had plunged to a 14-year low in September.

The dollar has been sliding since the Federal Reserve cut rates from 5.25% to 4.75% in September to help rejuvenate confidence in the world's largest economy.

This followed a summer of turmoil in the world's credit markets, sparked by record loan defaults in the US sub-prime mortgage sector.

Since then, a raft of mostly disappointing economic news and soft inflation figures has prompted anticipation of further rate cuts.

While analysts expect the US Federal Reserve to cut interest rates, the European Central Bank is tipped to raise rates within coming months.

There are fears in Europe that a strong euro relative to the dollar could harm exports to the US and China.

SEE ALSO
Euro hits $1.42 and keeps rising
29 Sep 07 |  Business
Euro bursts to fresh dollar high
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26 Jul 07 |  Business
Yuan hits new high versus dollar
25 Jul 07 |  Business
European economy 'sound' - Trichet
11 Sep 07 |  Business

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