(Recasts with reaction to US data, updates prices, adds
comment)
NEW YORK, Feb 27 (Reuters) - The dollar fell to a record
low against the euro on Wednesday after Federal Reserve
Chairman Ben Bernanke signalled the U.S. central bank will
continue to cut rates despite stubborn inflation.
Adding to pressure on the U.S. currency, a report showed
new U.S. single-family home sales fell in January to the lowest
rate in nearly 13 years and housing inventories swelled,
despite falling prices. For more details, see [].
The dollar also slid to an all-time low versus a basket of
currencies on expectations the Federal Reserve will cut
interest rates aggressively, making U.S. assets less attractive
than those of countries with higher interest rates.
The euro/dollar <EUR=> was up 1.1 percent midway through
the New York session at $1.5133. The euro had climbed as high
as $1.5143, according to Reuters data, the first time it has
climbed above $1.51 in its nine-year history. Dollar/yen was
down 0.9 percent at 106.34 <JPY=>.
"It still means that the Fed is going to err on the side of
supporting growth at all costs," said Brian Dolan, chief FX
strategist at Forex.com in Bedminster, New Jersey. "I am
convinced they are prepared to ride through inflation well
above their target for the rest of the year at the minimum.
They are going to cut rates as need be to support economic
growth."
Bernanke, in testimony to the House of Representatives'
Financial Services Committee, emphasized the risks facing the
U.S. economy and said the central bank would do what was
necessary to counter them.
"It is important to recognize that downside risks to growth
remain," he said. "The (Fed) will be carefully evaluating
incoming information bearing on the economic outlook and will
act in a timely manner as needed to support growth and to
provide adequate insurance against downside risks," he said.
The Fed has lowered benchmark overnight interest rates to 3
percent from 5.25 percent since mid-September and financial
markets expect policy-makers to lower them by a further
half-percentage point at their next meeting on March 18.
While Bernanke said it was "important" to recognize that
downside risks to growth remain, he also said the Fed had to
keep a close watch on prices.
DURABLE GOODS
Earlier a report showed U.S. durable good orders fell 5.3
percent in January, the most in five months, compared with the
4 percent forecast from economists polled by Reuters.
[].
The report added to fears of a U.S. economic slowdown at a
time when rising oil prices are pushing prices higher, leaving
the Fed with the dilemma of whether growth or inflation is
potentially the bigger problem.
"This is another piece of data that justifies concerns
about stagflation," said Adam Fazio, senior currency strategist
at CIBC World Markets in New York. "This also adds to the case
that we're going to see a 50-basis-point easing in March."
The dollar index fell to a record low of 74.070 <.DXY>, and
the greenback also plumbed a historic trough of 1.0624 Swiss
francs <CHF=>.
Rallying commodity prices helped drive units like the
Australian dollar <AUD=>, which rose to a 24-year peak against
the dollar of 0.9417, according to Reuters data. It last traded
up 0.9 percent to $0.94151, close to the session high.
The New Zealand dollar jumped to a fresh 23-year post-float
peak of $0.8213 <NZD=>.
(Reporting by Nick Olivari; Additional reporting by Gertrude
Chavez-Dreyfuss in London and Toni Vorobyova in London; Editing
by Chizu Nomiyama))
