Dollar hits record low vs. euro
USA Today/Reuters
November 20, 2007

NEW YORK (Reuters) — The dollar slid to a record low versus the euro Tuesday after the Federal Reserve said a housing slump, tighter credit conditions and high oil prices would likely slow U.S. economic growth in 2008.

The forecast was released along with minutes from the Fed's October policy meeting, which revealed officials' decision to cut rates was a close call following a debate on whether to await more evidence that a housing slump was curbing growth.

The Fed's forecast for U.S. growth to slow next year to 1.8% to 2.5%, sharply down from the 2.5 to 2.75% forecast in June, suggested to some investors that the Fed will have to cut benchmark lending rates again in December or earlier to prevent the economy from stalling further.

"Whether it happens tonight or at the next meeting, the Fed looks set to cut rates," said Michael Malpede, a senior currency strategist, at Man Global Research in Chicago. "I think that means the euro is probably headed to $1.50 by year end."

The euro extended gains, rising 1% to a record $1.4822, according to Reuters data. The euro was on track for its biggest one-day gain versus the greenback in a year and last traded at $1.4810.

The dollar inched higher vs. the Japanese currency, rebounding from earlier losses, as U.S. stocks rallied at the end of the session. The dollar last traded 0.1% higher at 109.90 .

The Fed's next policy meeting is on Dec. 11. Markets expect a quarter-point cut in the federal funds rate. The central bank cut the funds rate in October by a quarter point to 4.50% after slashing it by half a point in September.

Demand for the greenback started to fall earlier in the session after a report showed U.S. housing permits fell 6.6% in October to a 14-year low.

"People are grasping for any reason to sell dollars," said Win Thin, a currency strategist at Brown Brothers Harriman in New York. "It does show how dollar-negative sentiment is."

Copyright 2007 Reuters Limited.

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