Source AP ©

Dollar goes on falling

The dollar continued to weaken on Wednesday.

The dollar slumped against the euro. After rising above $1.42, the 13-nation European currency bought $1.4186 in late New York trading, from $1.4164 Tuesday.

On Wednesday, the U.S. Commerce Department said that construction of new homes plunged 10.2 percent in September, reflecting the deepening troubles in the U.S. housing sector.

The dollar also fell against the Canadian currency, also known as the loonie, which resumed its upward course, helped by Canada's strong oil exports. The loonie bought $1.0241 American, up from $1.0206 Tuesday, as crude prices hit a record $89 a barrel.

The British pound climbed to $2.0355 from $2.0315, and the dollar fell to 116.55 Japanese yen late Wednesday from 116.69 yen.

The Labor Department said its Consumer Price Index rose 0.3 percent last month as energy costs and food prices rose. That was slightly ahead of the 0.2 percent economists had expected, but unlikely to be a barrier to a further interest rate cut.

Core inflation, which excludes energy and food, was up a more moderate 0.2 percent, in line with expectations.

The release of the Fed's Beige Book, which measures business activity and sentiment, reported cooling third-quarter economic activity and lower business confidence. The report, coming on top of mixed third-quarter corporate earnings and continuing worries over the housing sector, intensified investors' recession worries.

Economists have mixed feelings about the Fed's next move. Employment reports for September have been positive, but the lingering credit crunch and signals of economic slowdown may trigger further rate cuts.

Lower interest rates, used to jump start the economy, can also weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.

In other New York trading, the dollar fell against the Swiss franc, buying 1.1814 from 1.1824 Swiss francs Tuesday.