Speculation that the subprime mortgage crisis is spreading drove the dollar to a record low against that euro today, while pushing it down to its lowest mark against six major currencies to its lowest level since 1995, according to Bloomberg News.
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.
“The Countrywide report simply added to the dollar selling,” Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York, told Bloomberg. “The concern is that we are starting to see the subprime issues spread into the credit market, which will knock on growth.”
The dollar had dropped 0.21 percent to $1.3835 per euro as of 10:31 a.m. in New York, after reaching a record of $1.3852. An index of the dollar’s value against six major currencies fell to 80.07, near the lowest since 1995. A further slump might trigger a drop to 76, according to Brian Garvey, senior currency strategist in Boston at State Street Global Markets.
“Two factors are in play against the dollar here: credit concern and interest rate outlook,” said Garvey, whose firm is one of the world’s largest custodians of investor assets, with $12.3 trillion under management. “We are recommending investors to short the dollar.”
At least 35 bond and loan deals worldwide have been pulled, delayed or restructured in the past five weeks, according to Bloomberg data. A report tomorrow by the National Association of Realtors may show U.S. existing-home sales dropped last month to the lowest in four years, analysts said.
