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Dollar Falls on Speculation Housing Slump to Swell Bank Losses Agnes Lovasz and Stanley White The dollar fell against the euro, erasing most of yesterday's gains, on speculation the worst U.S. housing slump in a quarter of a century will swell credit-market losses. The currency weakened against the Japanese yen and the Swiss franc after Bank of America Corp. predicted the Federal Reserve will lower its target rate by another 75 basis points this year following a reduction to 2.25 percent yesterday. Reports this week on U.S. mortgage demand and manufacturing will probably show the economy is slowing. ``We're approaching a dollar low, but we probably haven't seen it yet,'' said Adrian Schmidt, senior currency strategist in London at Royal Bank of Scotland Group Plc, the fourth-biggest currency trader. ``The market still expects the Fed to cut aggressively,''he said, adding that the U.S. currency may fall to as low as $1.65 before rebounding later this year.
The U.S. currency fell to $1.5757 per euro at 9:59 a.m. in London, from $1.5625 yesterday, when it rose 0.7 percent, the most since Feb. 7. The dollar declined to 98.23 yen, from 99.85 yesterday, when it surged 2.7 percent, the biggest gain since January 1999. The yen traded at 154.76 per euro, compared with 155.95 yesterday. The dollar declined to 0.9911 Swiss franc from 1.0024. The franc, often favored in times of crisis, has advanced 14 percent this year. The U.S. currency fell 0.3 percent to 92.98 U.S. cents per Australian dollar and slipped 0.6 percent against the New Zealand dollar to 81.19 cents. Extends Decline The dollar extended its decline against the euro, the yen and the Swiss franc on speculation some European and U.K. banks were in difficulties. ``There are rumors doing the rounds on various financial institutions being in trouble,'' said Adam Cole, the London-based head of currency strategy at Royal Bank of Canada, the nation's biggest lender. ``European and U.K. banks are rumored to be in trouble.'' HBOS Plc, Britain's biggest mortgage lender, said it has ``ready access'' to funding after the company plummeted in London trading.
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