(Global Debt Bubble) Dollar Falls to Record Against Euro on Mortgage, Credit Concern

Dollar Falls to Record Against Euro on Mortgage, Credit Concern

By Bo Nielsen and Min Zeng
July 24, 2007
Source

July 24 (Bloomberg) -- The dollar declined to a record against the euro and weakened versus a dozen other of the most actively traded currencies on speculation subprime mortgage losses will deepen, slowing U.S. growth.

The currency's drop accelerated after Countrywide Financial Corp., the biggest U.S. mortgage lender, reported its third straight decline in quarterly profit as late loan payments increased. At least 35 bond and loan deals worldwide have been pulled, delayed or restructured in the past five weeks, according to Bloomberg data.

``The concern about subprime and its spread into the broader credit market and growth is still there,'' said Brian Garvey, senior currency strategist in Boston at State Street Global Markets, one of the world's largest custodians of investor assets, with $12.3 trillion. ``You have already seen some spillover into the credit market.''

The dollar dropped to $1.3835 per euro at 9:25 a.m. in New York from $1.3807 yesterday. It reached a record of $1.3852 earlier. The dollar touched 120.41 yen, the weakest since May 16, before trading at 120.56, compared with 121.09 yesterday.

The dollar earlier weakened after it reached levels that triggered automatic orders to sell. The U.S. currency fell to a 26-year low against the pound and the weakest since March 1985 versus New Zealand's currency.

Sydney-based Basis Capital Fund Management Ltd., an Australian hedge fund, said it hired Blackstone Group LP as an adviser after two of its funds ran into trouble by investing in the unrated, riskiest portions of so-called collateralized debt obligations. These portions are first in line for any losses when borrowers fall short on mortgage payments.

Dollar Index

An index of the dollar's value against six major currencies traded at 80.055, near the lowest since 1995. A further slump may erode demand for U.S. securities from some investors abroad, according to Adam Cole, a senior currency strategist in London at RBC Capital Markets Ltd.

``The housing market has yet to hit bottom,'' said Antje Praefcke, a currency strategist in London at Commerzbank AG. ``The widening of U.S. credit spreads continues to eat away at dollar support.''

To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net ; Min Zeng in New York at mzeng2@bloomberg.net .
Last Updated: July 24, 2007 09:30 EDT