Dollar Slumps to Record Low Versus Euro on Bear Stearns Loss

By David McIntyre and Stanley White

July 18 (Bloomberg) -- The dollar fell to a record low against the euro after Bear Stearns Cos. reported hedge fund losses, fueling speculation the Federal Reserve will cut interest rates to support the economy.

The U.S. currency also fell against the yen as investors scaled back carry trades, where they buy higher-yielding assets with money borrowed in Japan. Fed Chairman Ben S. Bernanke may be asked about financial industry losses caused by mortgage defaults when he testifies before Congress today.

``The subprime woes may weigh on the broader U.S. economy,'' said Yuji Saito, head of the foreign-exchange sales department at Societe Generale SA in Tokyo. ``There's a bias for selling the dollar.''

The dollar fell to a record low of $1.3822 against the euro before trading at $1.3816 at 9:41 a.m. in Tokyo from $1.3781 in New York yesterday. It dropped to 121.94 yen from 122.34. The U.S. currency may decline to $1.3830 per euro and 121.50 yen today, Saito said.

The dollar fell to a 26-year low of $2.0495 against the pound. It was quoted at 87.53 U.S. cents against the Australian dollar, near an 18-year low of 87.60. The dollar has fallen against 15 of the 16 most-active currencies since Bear Stearns said June 22 it had to bail out its hedge fund because of wrong- way bets on securities backed by subprime loans.

To contact the reporter on this story: David McIntyre in Sydney at [e-mail] ; Stanley White in Tokyo at [e-mail]
Last Updated: July 18, 2007 16:55 EDT

Bah!

[iminplaya]

We can expect the dollar to fall against the euro or the yen or the pound. But when it can't hold up against the Mexican peso, as what's happening now, you know something's afoot.