By Veronica Brown
LONDON, Feb 27 (Reuters) - The dollar slid to a record low
beyond $1.50 versus the euro on Wednesday as weak U.S. data
reinforced the view that U.S. interest rates have further to
fall, driving up oil and gold.
European stocks were dragged lower by a slide in bank
shares, bucking a broadly firmer trend in global equity markets,
The dollar hit record lows against the euro, the Swiss franc
and a basket of major currencies.
Its fall against the euro was helped by a surprisingly
strong reading of German corporate sentiment on Tuesday from the
Ifo research instsitute which reduced expectations that the
European Central Bank might soon cut interest rates.
This contrasted sharply with data on Tuesday that U.S.
consumer sentiment had hit a five-year low and that the collapse
in U.S. house prices accelerated to a record pace in the fourth
quarter of 2007 [], further signs that the economy
may be in recession.
Comments by U.S. Federal Reserve Vice Chairman Donald Kohn
on Tuesday put further pressure on the dollar. Kohn said a weak
economy was a bigger worry than inflation risks, suggesting a
willingness to keep cutting interest rates [].
"Euro/dollar is following the interest rate differential.
Now we have passed the $1.50 level, which was important. It
looks like in the coming weeks we will see $1.52, which is the
next big resistance level," Credit Suisse global FX strategist
Marcus Hettinger said.
"We're seeing a combination of the stronger German Ifo and
Kohn's comments which indicated that we will see more U.S. rate
cuts," he added.
The euro was up almost half a percent on the day at $1.5047,
having hit a record $1.5057 earlier <EUR=>. The dollar fell to a
record low of 74.366 against a basket of major currencies
<.DXY>.
COMMODITIES IGNITE
The dollar's difficulties drove commodities higher. U.S.
crude oil prices neared record highs above $101 a barrel, while
Brent crude oil rose above $100 for the first time.
High winter fuel demand in the United States and Europe due
to cold weather and indications from OPEC that it will not
increase production at its meeting next week also kept oil
prices strong.
"Cold weather in the U.S. Northeast and anticipation that
OPEC will not increase oil production levels at the March 5 OPEC
meeting were also supportive for the oil price," David Moore, a
commodities strategist at the Commonwealth Bank of Australia
said in a research note.
Gold prices hit a historic high at $957.60, with the weaker
dollar making dollar-priced commodities more attractive for
non-U.S. investors.
An early dip in European shares took the gloss off a firmer
world equity market after Japan's Nikkei hit a six week high
<>.
Shares in European banks extended losses after results from
Britain's HBOS <HBOS.L> fell short of expectations. HBOS shares
fell more than 7 percent.
The FTSEurofirst 300 index <> of top European shares
was down 0.4 percent at 1,355.78 points, having fallen by as
much as 0.5 percent to session lows.
But gains in commodities and oil helped push up shares in BP
<BP.L> and Total <TOTF.PA> by 0.1 to 0.6 percent, while miners
Rio Tinto <RIO.L> and Anglo American <AAL.L> rose 1.1 percent.
(Editing by Ian Jones)
