Dollar Trades at Record Low Against Euro

TOKYO — The dollar traded near a record low against the euro on speculation the Federal Reserve will cut borrowing costs further while the European Central Bank keeps interest rates on hold.

The greenback fell below $1.60 a euro for a second day as the extra yield that two-year German government bonds pay over similar-dated Treasuries widened to the most in two weeks and as crude oil surged above $119 a barrel. The Australian dollar traded near a 24-year high against the American currency before a report that is forecast to show inflation accelerated.

"A widening yield disadvantage is pushing down the dollar against the euro," a general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker, Masanobu Ishikawa, said. "The European economy is stronger than the U.S. Hefty oil prices are bad for consumption in the U.S."

The dollar traded at $1.5977 a euro at 9:42 a.m. in Tokyo, from $1.5991 in New York yesterday, when it touched $1.6019, the lowest since Europe's currency debuted in 1999.

The dollar traded at 103.04 yen from 103.02 yen. The euro traded at 164.61 yen from 164.76 yen. The dollar may fall to $1.6030 a euro today, Mr. Ishikawa forecasts.

The 15-nation European currency strengthened against the dollar yesterday as a ECB governing council member, Christian Noyer, said policy makers will act to restrain consumer prices if inflation doesn't slow.