Dollar free falls in a record one-day loss
KAISERSLAUTERN, Germany — The dollar appears to be in free fall against the euro.
On Wednesday, the U.S. currency had its biggest ever one-day loss against the euro — dipping about 3 percent — since the European currency debuted in 1999.
At Community Bank, it cost 5 cents more to buy a euro on Thursday than it did on Wednesday. The bank charged $1.40 to buy a euro on Wednesday. The Community Bank rate jumped to $1.45 for Thursday.
The dollar’s plummet is linked to the Federal Reserve’s action Tuesday when it cut its key interest rate target to a record low. The Fed reduced its federal funds rate target to a range of zero percent to 0.25 percent.
Interest rate cuts can help spur economic activity, but they tend to undermine currencies as investors seek higher returns elsewhere, The Associated Press reported.
It was not that long ago that the dollar was increasing in value against world currencies. This past summer and fall, economists attributed the dollar’s rise to beliefs that a global recession would be more supportive for the U.S. dollar than the euro. Between July and November, the dollar climbed about 24 percent against a basket of six major world currencies, The Washington Post reported.
The Fed’s aggressive interest rate policy, coupled with a sense that the United States may face dire problems in the auto industry, have erased about half those gains in the past three weeks, according to The Post.