Dollar drops to new record low

The dollar fell to a new record low against the euro and a 15-year low against five other major currencies.

Photo: Dollar drops to new record low

The 13-nation euro rose as high as $1.4130 Monday, its highest level since its debut in 1999, before drifting back to $1.4087 in late New York trading. That compared with a previous peak of $1.4119 on Friday, and the $1.4083 it bought in New York late that day. In other trading Monday, the British pound edged higher to $2.0214 from $2.0200.

The Federal Reserve's half-point interest rate cut last week to 4.75 percent came in response to market turbulence in the U.S. and elsewhere amid the subprime mortgage crisis. Investors this week will be looking for signs that U.S. inflation is under control. The market is also hoping that readings this week on demand for U.S. durable goods, the housing market and consumer spending power will show that the U.S. economy isn't heading for recession.

"The Fed is not going to respond once with interest rates and call it a day," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. "It's very likely that there'll be a series of rate cuts."

Future rate cuts could further weaken the dollar, as dollar-denominated investments become less attractive.

The dollar's decline diminishes the spending power of American tourists in Europe, while it does the opposite for many visitors to the U.S. It also makes U.S. exports more competitive, which is good news for American manufacturers.

Comments expected Wednesday by the president of the European Central Bank, Jean-Claude Trichet, "will be closely watched and assuming the theme here remains bullish, scope for further euro gains cannot be overlooked, and the next big target of $1.4200 is already well within sight," said James Hughes, a market analyst at CMC Markets.

In other trading in New York, the dollar slid to 114.88 yen from 115.39 yen even as Japan was poised to install a new prime minister on Tuesday after moderate Yasuo Fukuda was picked Sunday to succeed Shinzo Abe, who resigned earlier this month.

The dollar rose to 1.1726 Swiss francs from 1.1730 late Friday, and it rose against the Canadian dollar to 1.0011 from 1.0005.