The dollar hit a record low versus the euro for the fifth trading day in a row on Wednesday, stung by weak U.S. consumer confidence and housing figures that fuelled expectations of a U.S. interest rate cut next month.
Such a cut -- coming after last week's 50-basis-point reduction in the fed funds rate -- would further erode the dollar's yield appeal and thus demand for dollar assets.
The greenback also held near 1992's all-time low against a basket of six major currencies, despite recovering some losses on profit-taking in early European trade.
Market participants acknowledge that the euro's gains versus the dollar may be excessive as it has climbed nearly 4 percent this month. But many anticipate that dollar weakness is likely to continue in the near term.
"I still think there is more downside risk for the dollar here. Clearly the (U.S.) numbers aren't helping and if further expectations of U.S. rate cuts are going to be intensifying as the numbers weaken, that again will be weighing on the dollar," said Mitul Kotecha, head of global FX research at Calyon.
"We are still contrasting very weak U.S. numbers with reasonably firm euro zone ones which gives a good reason for selling the dollar," he said, noting that although the German Ifo business sentiment index fell to a 1-1/2 year low in September, historically it remained at elevated levels.
The euro rose as high as $1.4162 before easing back to $1.4134 by 0745 GMT. The dollar index was at 78.434 after sliding to a 15-year low of 78.213 on Tuesday -- within reach of the all-time trough of 78.19 set in 1992.
Data on Tuesday showed that U.S. consumer confidence fell to its lowest in nearly two years on growing concerns about jobs and financial market turmoil, while existing home sales showed their smallest year-on-year growth in 5 years.
(Reuters)