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Dollar Drops to Record Low Against Euro on

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nostinkinc   Friday, 03/07/08 03:00:40 PM
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Dollar Drops to Record Low Against Euro on Weak US Jobs Data, but Later Rebounds in Europe

Friday March 7, 12:29 pm ET

By Matt Moore, AP Business Writer


FRANKFURT, Germany (AP) -- The dollar briefly fell Friday to a record low against the euro after data showed U.S. job cuts hit the biggest monthly number in five years.
But the currency regained lost ground and was trading higher against the euro by late afternoon in Europe as traders digested the Federal Reserve's announcement that it would provide more cash to the banks that need it.

The U.S. Labor Department said American employers cut 63,000 jobs in February -- the starkest sign yet that the U.S. is heading toward a recession or in one already.

Those fears pushed the 15-nation euro as high as $1.5463, the latest in a string of all-time highs but the surge was cut short as the focus shifted to a Fed announcement that it would boost the size of auctions planned for March 10 and March 24 to $50 billion each. That is up from the $30 billion limits it had previously announced. The auctions serve as short-term loans to get banks the cash they need to keep lending to their customers.

That pushed the euro down to $1.5356 in late afternoon European trading -- below the $1.5370 it bought late Thursday in New York.

European businesses say they are starting to feel the pinch, notably from U.S.-based buyers who assert that the high euro makes European goods more expensive.

Also Friday, the British pound traded above the $2 mark for a second day, buying $2.0145 -- above the $2.0092 it bought late Thursday in New York. It had jumped Thursday after the Bank of England kept its key interest rate unchanged at 5.25 percent.

The dollar fell as low as 101.40 Japanese yen, near a three-year low, before it recovered to 102.83 yen in late European trading. It was still down from 103.09 yen late Thursday.

"The prolonged silence from the Japanese camp in the face of the yen's gains is not only historic but rather conducive to its ascent," said Ashraf Laidi, the chief foreign exchange analyst at CMC Markets in New York.

He said the Federal Reserve's priority of tackling the economic slowdown over inflation will "make the 100 yen figure an inevitability."

That could happen "as early as this month, especially if the Fed opts for a 75 basis point easing on March 18," he said.

Lower interest rates can jump-start a nation's economy, but can weigh on its currency as traders transfer funds to countries where they can earn higher returns.


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