Dollar Sets Record Low on US Economic Gloom, Talks of Another Interest Rate Cut

BERLIN-The dollar sank to a new low against the euro Wednesday on pessimism about the American economy and speculation that Washington will cut interest rates again.The euro spiked to $1.4856 before retreating slightly to $1.4829 in afternoon European trading. It broke the $1.48 mark for the first time on Tuesday, when it settled at $1.4815 in late New York trading.The dollar also hit a two-year low against the Japanese yen, falling as far as 108.27 yen before rising slightly to 108.53 yen. That was still down from 109.69 yen on Tuesday.The British pound was down to $2.0582 from $2.0667.The euro, the pound and other currencies have been climbing steadily against the dollar since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.Surging oil prices-which rose to a new record high above $99 in early Asian trading Wednesday-have driven up commodity-backed currencies such as those of Canada, Australia and New Zealand.The dollar has been further weakened by U.S. interest rate cuts-which can be used to jump-start an economy, but can also weaken a currency as investors transfer funds to countries where they can earn higher returns. The U.S. Federal Reserve has already cut rates twice.On Tuesday, the Fed released the minutes of its October meeting and its economic forecasts for the next three years, which suggested to investors that a December rate cut was likely given the state of turmoil in credit markets and the Fed's forecast of decreasing inflationary risk.The dollar appeared to gain little cheer from U.S. Labor Department data on Wednesday showing that fewer people signed up for jobless benefits last week, with the figure dropping to the lowest level since the beginning of November. http://biz.yahoo.com/ap/071121/dollar.html?.v=3

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