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22nd October 2008
Oct. 22 (Bloomberg) -- The euro fell below $1.28 for the first time since November 2006 and the pound tumbled to a five- year low on speculation European central banks will cut interest rates as the global economy heads for recession.
The single European currency also slid to the weakest in more than four years versus the yen as Asian stocks declined, reducing demand for higher-yielding assets funded by loans in Japan. Sterling declined to a one-week low versus the euro after Bank of England Governor Mervyn King said the U.K. is probably in a recession.
``Expectations for rate cuts in Europe and the U.K. are growing stronger by the day because of the weak economic outlook,'' said Koji Fukaya, senior currency strategist at the Tokyo unit of Deutsche Bank AG, the world's largest currency trader. ``The euro still looks expensive. Other European currencies are also likely to fall.''
The euro fell to $1.2743 before trading at $1.2854 as of 7:30 a.m. in London from $1.3063 late yesterday in New York. It dropped to 127.01 yen, the lowest since April 2004, and last traded at 127.88 from 103.80. The euro fell to as low as 1.4872 Swiss francs, the weakest level since April 2003. Japan's currency was at 99.581 per dollar from 100.14.
The pound dropped to $1.6203, the lowest since September 2003, and traded at $1.6325 from $1.6706. It also declined for a third day against the euro to 78.75 pence from 78.17.
Argentina's planned seizure of $29 billion of private pension funds stoked concern the nation is headed for its second default in a decade. |