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Dollar declines, and euro increases

Thu., March 13, 2008

NEW YORK – The dollar fell against most major currencies on Wednesday, including a new low against the euro, which fetched $1.55, as skepticism grew over the latest U.S. Federal Reserve Bank plan to restore calm global credit markets.

The Fed on Tuesday unveiled a rescue package that would direct as much as $200 billion into banks and investment houses. The action was in concert with help from the European Central Bank and central banks in Britain, Switzerland and Canada.

But the Fed action was overshadowed by U.S. economic struggles, halting the dollar’s rise and pushing the euro to a record high of $1.5559, surpassing its previous record of $1.5495 set Tuesday.

Late Wednesday, the 15-nation euro fell back to $1.5526 – still above the $1.5319 it bought in New York late Tuesday.

“The positive dollar impact of yesterday’s coordinated central bank operations is already proving unsustainable as the U.S. currency falls across the board,” said Ashraf Laidi, the chief foreign exchange strategist for CMC Markets in New York.

Traders also weighed a report from Zawya Dow Jones that said the United Arab Emirates was deciding whether to continue pegging its currency to the plummeting U.S. dollar.

In January, Qatari Prime Minister Sheikh Hamed bin Jassem Al Thani said his country was also reconsidering its link to the dollar.

The British pound rose to $2.0243 from $2.0029 even after British Treasury Chief Alistair Darling cut forecasts for domestic growth when he delivered his first annual budget against the backdrop of the worst global economic conditions for a decade.


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