The US dollar rate set a new record low against the Japanese yen as it dropped below 100 yens per one dollar for the first time since 1995. Interest rates, stock prices and the dollar rate continuers to decline in the USA, whereas investors continue to wonder whether they should keep their funds in US assets.
The euro reached another high in London – 1.5624 per dollar. The demise of the dollar accelerated after Carlyle Capital Corp. said that it defaulted on $16.6 billion of its debts.
The fear of new losses from the mortgage crisis and the declining dollar rate led to the collapse of stock markets.
The cost of gold reached the level of $1,000 per ounce for the first time in history. Crude oil prices set another record too: West Texas Intermediate (WTI) crude for April delivery was up to $110 and then $100 dollars per barrel.
Japan’s Nikkei index dropped by 3.3 percent on March 13, Britain’s FTSE 100 – by 1.5 percent, Europe’s DJ Stoxx – by 1.3 percent, Russia’s RTS – by 1 percent.
According to The Wall Street Journal, many chief financial officers of US companies believe that the recession in the US economy has already started. They say that the economic situation in the United States will not improve in 2008. A survey conducted by Duke University showed that more and more finance chiefs tend to become pessimistic about the US economy.
The survey also revealed that the current recession in the USA would be more serious than the previous two recessions, each of which lasted eight months.
Michael Woolfolk, senior currency strategist at the Bank of New York, said he expects the dollar to keep dropping ahead of the Federal Reserve's meeting next week. Speculation has been growing that the Fed might cut rates by as much as three-quarters of a percentage point.
"Other currencies have rallied too far, too fast," Woolfolk said. "The Fed has turned a blind eye to inflation, and as the expectations fall for the U.S. economy and global equities, we will continue to see that undermine the dollar."
The yen's strength is bad news for Japan's economy, which has been showing signs of weakening, because it makes exporters' products more expensive abroad and erodes the value of their overseas earnings, the AP reports.
Japanese leaders quickly cautioned against instability in currency markets, but made no mention of any intervention to stem the dollar's slide.
Prepared by Dmitry Sudakov