Nov 12, 2007 11:46 am US/Eastern
Weaker Dollar Hitting Home For U.S.
Costs For Americans On The Rise In Part Due To Currency's Power
NEW YORK (CBS) ―
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The dollar has been suffering from speculation that the Fed, which recently has cut rates twice, may keep doing so even as its major European counterparts hold rates steady.
AP
The weak dollar is wreaking havoc on investor confidence and the impact is just beginning to be felt in many ways, reports CBS News correspondent Anthony Mason.
The U.S. dollar, once the gold standard of currencies, is falling hard and fast around the world.
At $1.46, the euro is up nearly 12 percent against the greenback. The yen traded at $1.1038 per dollar, an 18-month high, and for the first time since 1976, the Canadian dollar has risen more than 20 percent in value against the U.S. dollar at $1.06.
On Friday, the Dow Jones industrial average tumbled more than 220 points, ending down 4 percent for the week. The S&P 500 lost 21 points and the NASDAQ closed off 68 points.
Experts point to rising oil and gasoline prices, the slumping housing market, concerns that foreign investors will dump their dollar holdings, and speculation that the Federal Reserve could cut interest rates for the third time this year. Even international supermodel Gisele Buncheon said she wants to be paid in anything but the dollar, but she later admitted it was only a joke.
For the average person sitting at home in America, something for $10 is now $15 or $20 overseas.
"Go to a department store in New York right now and you're likely to be elbowed aside by a stampede of europeans who are here on a feeding frenzy because everything looks so cheap," said Mason.
The dollar rose against the euro Monday, gaining some of the ground lost last week when the U.S currency set record lows.
The euro bought $1.4604 in morning European trading, down from $1.4673 in New York late Friday and more than a cent short of its all-time record - $1.4752, reached earlier in Friday's session.
The British pound, which has been trading at its highest levels against the dollar since the early 1980s, sank to $2.0815 from $2.0909.
Paul Jackson, a senior forex dealer at CMC Markets, said there had been "some profit taking" on the euro after its latest highs.
He added that the dollar is "regaining some significant ground against the pound as sliding business confidence seems set to pave the way for a rate cut at the Bank of England."
The dollar has been suffering from speculation that the Fed, which recently has cut rates twice, may keep doing so even as its major European counterparts hold rates steady.
Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where they can earn higher returns.
The dollar weakened late last week after Federal Reserve Chairman Ben Bernanke said economic growth would slow noticeably in the U.S. in the coming months while rising oil costs would increase inflation pressures.
The U.S. currency was lower against the Japanese yen on Monday, dropping as far as 109.86 yen - its first time below 110 yen for a year and a half - before recovering to 110.47 yen in European trading.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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