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Last Updated: Wednesday, 27 February 2008, 20:19 GMT
Dollar falls to record euro low
US dollar
The dollar is falling as investors worry about the US economy
The dollar has fallen to a record low against the euro as traders bet that further interest rate cuts will be needed to stem a US recession.

The euro rose to $1.5135 dollars after buying $1.50 on Tuesday for the first time. Sterling climbed against the greenback too, reaching almost $2.

Lower US rates tend to send investors in search of other currencies which give a better rate of return.

The view is that UK and eurozone rates will not fall as much as in the US.

The UK pound traded at $1.988 in morning European trade after a raft of gloomy economic numbers issued on Tuesday.

In addition, Federal Reserve Vice Chairman Donald Kohn suggested that risks of a cooling economy were overshadowing the worries of rising inflation, hinting that US rates will be cut below their current level of 3%.

dollar euro graph

Five-year low

The latest sign of falling US consumer confidence came from the closely-watched Conference Board survey.

It said consumer sentiment fell to a five-year low in February because of growing recession fears.

At the same time, the number of US homes facing foreclosure rose 57% in January, compared with the same month of 2007.

Last month, the Fed slashed interest rates to 3% as it tried to prevent the US economy falling into recession.

"With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase," said Lynn Franco, a director of the Conference Board's consumer research centre.



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