Dollar plunges on world markets

Analysis

The dollar has continued its recent decline, falling to fresh 20-month lows against the euro as concerns grow about a US economic slowdown.

In early Wednesday trading in the Far East, the dollar was hovering at about $1.32 against the euro, and also down against both sterling and the yen. The dollar's continuing weakness came after US data showed a fall in both the price of goods and consumer confidence. Analysts now predict US interest rates will have to be cut early next year. This decision is in the hands of the Federal Reserve, and despite the Fed's continuing comments warning against inflation, economists believe it will have to cut interest rates soon to give the US economy a boost. US interest rates have now been on hold at 5.25% for three consecutive months, following 18 successive rate rises until August. The yen was up against the dollar after official Japanese data showed an unexpected rise in Japan's industrial production. It pushed the dollar down to 115.75 yen in early Wednesday trading, from 116.15 yen overnight in the US. Meanwhile, sterling was up to $1.953 after earlier hitting $1.9545, its highest level against the dollar since December 2004. (BBC NEWS)

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