limbo- how low can it go?

AP
Dollar Hits New Low Against Euro
Wednesday September 19, 6:36 am ET
By Matt Moore, AP Business Writer

Dollar Tumbles Briefly to Record Low on Fed Benchmark Rate Cut
FRANKFURT, Germany (AP) -- The dollar fell to an all-time low against the euro early Wednesday in the aftermath of a half-percent rate cut by the U.S. central bank.
The euro rose to $1.3987, a new high, in morning European trading before settling back to $1.3956. That was below the $1.3971 it bought in late New York trading the night before.
The Federal Reserve cut its benchmark interest rate a half-point to 4.75 percent, the first reduction in this key rate in four years. Most dealers had expected a quarter-point cut. Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors less return on investments denominated in the currency.
The Fed acted to calm financial markets afraid of an impending recession due to a slumping housing market, the credit crisis, and weak August jobs data. The Fed said it "will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."
The pound fell against the dollar to $2.0013, below the $2.0131 it bought in New York trading late Tuesday night.
The rising euro has yet to cause great consternation among most of the 13 nations that use the common currency, but as it rises, it can dampen exports, particularly to the United States, where the prices for anything from automobiles to steel to consumer goods are more expensive to American buyers.
That, coupled with the subprime credit crisis, has some officials wary though.
On Wednesday, German Economics Minister Michael Glos said that the U.S. crisis could dampen the economic recovery in his country, Europe's biggest economy.
In an interview published in the daily Bild newspaper, he said that "nobody knows how the U.S. financial crisis will affect Germany in the end."
He also said that a weakened dollar, along with higher oil prices, has the potential to slow Germany's growth, particularly among exports. Germany is the world's biggest exporter, just ahead of China and the United States.
"If the dollar's exchange rate further weakens, it will cast a shadow on our export chances."
The dollar strengthened against the Japanese currency, rising to 115.83 yen from 115.74 yen on Monday after the Bank of Japan kept its benchmark interest rate steady at half a percent and kept its assessment of the national economy unchanged.
The bank, in a monthly report released Wednesday, left its assessment for the world's second largest economy the same as in the previous month, saying moderate growth was holding up. The bank also repeated its optimistic outlook for the future, while expressing some caution about the U.S. economy.
"Japan's economy is expected to expand moderately," it said.
AP Business Writer Yuri Kageyama in Tokyo contributed to this report.