The C Directory Blog

October 29, 2007

The dollar’s southward trend

The US dollar falls to another record low against the euro as investors put their money down for the possibility on an US interest rate cut this week. What this means is that lower interest rates can weaken a currency as investors move funds to assets that enjoy a higher return.

The reason for the dollar’s decline has been woes of the US housing market, caused by the Fed increasing interest rates to slow accelerating inflation.

As a result of the higher borrowing costs, an increasing number of borrowers have defaulted on loans, especially in the sub-prime mortgage market - lending to those with poor credit histories.

Bad news for the US. Good news if you hold Euros, Australian or Canadian dollars, who have hit their peak in the last 2 decades against the US currency.

This post was contributed
by The One.

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