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Dollar slides to record low against euro

The US dollar skidded below ¥100 and marked fresh lows against the euro on Friday as more US economic woes roiled the markets after news of an emergency loan to prop up Wall Street firm Bear Stearns.

The US currency also slid below parity with the Swiss franc for the first time ever as a tame inflation report boosted the odds for a hefty rate cut by the US Federal Reserve.

At 9pm GMT, the euro was at US$1.5669, up from US$1.5624 in New York on Thursday, but off the record US$1.5688 hit earlier on Friday.

The dollar was at ¥99.18, down from ¥100.60 to test 12-year lows, and 0.9978 Swiss francs compared with SF1.0102.

The pound was at US$2.0219 after US$2.0317.

News of a near-collapse at white-shoe Wall Street firm Bear Stearns "sent reverberations throughout all markets worldwide, not only because this is another `too big to fail' scenario, but also because it has strong implications for a domino effect in the already weakened financial services industry and beyond," said Sherry Cooper, chief economist at BMO Capital Markets.

The latest round of turmoil prompted EU leaders on Friday to call on the banks to help stabilize nerve-wracked financial markets as they also sounded the alarm about the euro's record-breaking gains.

"We would like to invite financial institutions to help reduce the instability on financial markets within their limits," Slovenian Prime Minister Janez Jansa told reporters after chairing a summit of EU leaders.

EU leaders said that sharp swings in exchange rates "are undesirable for economic growth" and that "in the present circumstances we are concerned about the excessive exchange rate move."

Dealers said that in late trading the dollar steadied slightly amid speculation that central banks might be considering intervention.

"The weakness of the dollar and its record-breaking lows may result in the first coordinated attempt in 13 years to strengthen the currency," Jordan Eburne at PNC Bank said.

"The dollar making new lows against the euro and 12-year lows against the yen has brought about complaints from ECB President [Jean-Claude] Trichet and Japanese Finance Minister Fukushiro Nukaga. The Group of Seven nations may feel the need to step in, just as they last did in 1995 when the dollar was trading at similar levels against the yen," Eburne said.

He said the weakness of the dollar "is already beginning to affect other markets, like the commodity markets, as investors lose confidence in US assets. However, an intervention isn't likely imminent just yet as the weak dollar is helping support America's economy via an increase in exports, and the strong euro has been needed to help contain inflation in Europe."
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