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Dollar stumbles to 15-month low

The dollar dropped to a 15-month low as the euro rose above $1.50, even as Treasury Secretary Timothy Geithner reiterated his stance that a strong dollar is good for the U.S. economy.
/ Source: The Associated Press

The dollar pulled off a new 15-month low in late trading Wednesday after the euro rose above $1.50, while Treasury Secretary Timothy Geithner reiterated the administration's stance that a strong dollar is good for the U.S. economy.

Geithner, in a speech in Tokyo on his way to a summit of Asian finance ministers in Singapore, also said low interest rates and other government supports for the economy were still needed.

The expectation that the Federal Reserve will keep the key U.S. interest rate near zero has been weighing on the dollar. Higher interest rates make a currency more attractive for investors, since bets made in that currency can earn higher returns.

In late New York trading, the 16-nation euro retreated slightly to $1.4976 from $1.4978 late Tuesday. Earlier in the session, the euro bought $1.5048. The British pound fell to $1.6554 from $1.6737, while the dollar advanced to 89.84 Japanese yen from 89.77 yen.

The dollar edged up to 1.0086 Swiss francs from 1.0081 francs, and slipped to 1.0463 Canadian dollars from 1.0496 late Tuesday.

Against a basket of six major currencies, the dollar hit a 15-month low of 74.775 before climbing back to 75.130 in later trading.

Trading was light because of the Veterans Day holiday.

"The momentum and the conviction that the Fed will not raise rates any time soon, coupled with the fact that the major central banks continue to provide liquidity liberally" means the "fundamental force" weighing on the dollar will persist, said Brown Brothers Harriman analyst Marc Chandler in a research note Wednesday.

Federal Reserve officials speaking late Tuesday noted that the economic recovery is likely to be weak and reiterated that the central bank will keep rates low.

One official even suggested that the first rate hikes could be delayed until 2011.

"Any perception the Fed will keep rates lower for even longer will pressure the dollar," said UBS analyst Geoffrey Yu.

Investors around the world are viewing the dollar as weaker than other currencies because of low U.S. interest rates and huge budget deficits. They're using it for what's known as "carry trade" — traders borrowing dollars to make investments in emerging-market currencies, oil or equities. That bet weighs on the dollar.