Dollar dives as Fed rate cut eyed

Greenback sinks but off lows against the yen, euro on expectations the Fed will lower rates next week.

Last Updated: March 10, 2008: 7:53 AM EDT

TOKYO (AP) -- The dollar slipped against the euro Monday, but traded above the all-time lows from last week when investors recoiled from dire U.S. jobs figures.

The 15-nation currency bought $1.5386 in morning European trading compared with the $1.5335 it bought in New York late Friday.

The euro reached a record high of $1.5459 on Friday after a Labor Department report showed U.S. job cuts hitting the biggest monthly number in five years, but the euro then fell back after the Federal Reserve announced it would provide more cash to the banks that need it.

"Friday's disappointing non-farm payroll data looks set to weigh on the dollar for some time yet," said Gary Thomson of CMC Markets.

He said that the euro could reach $1.55 this week - particularly if the Federal Reserve continues to cut its interest rate.

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

"We've already seen the German trade balance data come out better than expected and this has helped shore up (the euro-dollar) just under the $1.54 level but really many are now eyeing that next big test of $1.55," Thomson said.

German exports were up 9% in January, showing healthy growth despite the euro's climb, government figures showed Monday.

The British pound traded above $2, buying $2.0204 - better than the $2.0173 it bought in New York late Friday.

The dollar fell to 102.12 Japanese yen from 103.89 yen on Friday.

First Published: March 10, 2008: 4:21 AM EDT

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http://money.cnn.com/2008/03/10/markets ... 2008031007