The Dollar fell to an all-time low versus the Euro for a third straight day on Thursday after Federal Reserve Chairman Ben Bernanke warned some small US banks could fail and flagged further interest rate cuts. Market mood on Dollar also was soured by news the government's second reading on 4Q US growth was unchanged from its advance estimate of 0.6%, whereas economists had forecast a slightly stronger result. A surprise big jump in initial weekly jobless claims also added to rising worries about the slowing economy.
Bernanke said he expected there would be some failures of smaller regional banks that invested heavily in real estate, but added that capital ratios among the largest banks remained good. He also said the central bank was in a more difficult position now to respond to a slowing economy than it was in 2001. Lower interest rates will further erode the appeal of Dollar-denominated securities at a time when the European Central Bank is not seen easing monetary policy any time soon and countries like Australia are raising rates.
EurUsd jumped to 1.5229 high for the first time in its nine-year history. It last traded at 1.5192 up 0.5%. UsdJpy dropped to a five-week low of 104.68 and last traded down 1.38% at 104.93. Gold price rose to historic highs of 972.50. UsdCad fell 0.54% to 0.9762. UsdChf fell to a record low at 1.0472 and last traded at 1.0511 down 1.12%.
The dollar has been under pressure since the Fed began cutting rates, pushing benchmark overnight lending rates down by 225bp since mid-September to 3%.