US Dollar Falls to New Low Amid Fed Rate Cut Speculation

The U.S. dollar dipped to another record against the euro on Monday, trading below $1.44 for the first time as markets anticipated a likely interest rate cut by the Federal Reserve later this week.

The 13-nation euro rose above its previous record of $1.4393, set Friday, and climbed as far as $1.4438 before settling back to $1.4404. That was still above the $1.4385 it reached late Friday.

The euro has been climbing steadily against the dollar, soaring to new highs almost weekly since August amid fears over the U.S. economy’s health — stoked by the subprime credit crisis and increasingly disappointing economic reports.

The euro’s rise, which makes goods from the U.S. cheaper to buy, can hurt exports from countries that use the currency, among them Germany and France.

Markets expect the Fed to cut interest rates from their current level of 4.75 percent on Wednesday — adding to an unexpectedly bold half-point cut last month.

“Following a series of hawkish speeches by Fed officials during the last week and disappointing housing numbers, we are convinced that the Fed is inclined to cut rates again,” HVB/UniCredit economists Harm Bandholz and Davide Stroppa wrote in an investment note. They forecast a quarter-point cut.

Although lower interest rates can jump-start the economy, they can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns. Higher rates can boost a currency.

The dollar also has been pressured by record oil prices — which have gone above $93 — and gold futures, which have hit $780 per ounce — their highest price since January 1980.

On Monday, the British pound bought $2.0590 — near a three-month high, and up from $2.0521 on Friday. The dollar rose against the Japanese currency, however, climbing to 114.65 yen from 114.22 yen.

By MATT MOORE | The Associated Press