US Economic Gloom Brings New Dollar Low

The euro spiked to $1.4855 before retreating slightly to $1.4787 in morning European trading. It broke the $1.48 mark for the first time on Tuesday, settling at $1.4815 late in New York.

The dollar also hit a two-year low against the Japanese yen, falling to purchase as little as 108.81 yen before rising slightly to 109.19 yen -- compared with 109.69 yen in New York on Tuesday. It was last lower when it purchased 108.76 yen on Sept. 5, 2005.

The British pound was down slightly to $2.0639 from $2.0667 in New York.

The euro, the pound and other currencies have been climbing steadily against the dollar since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.

Surging oil prices -- which rose to a new record high above $99 in early Asian trading Wednesday -- have driven up commodity-backed currencies such as those of Canada, Australia and New Zealand.

The dollar has been further weakened by U.S. interest rate cuts -- which can be used to jump-start an economy, but can also weaken a currency as investors transfer funds to countries where they can earn higher returns.

On Tuesday the U.S. Federal Reserve released the minutes of its October meeting and its economic forecasts for the next three years, which suggested to investors that a December rate cut was imminent given the state of turmoil in credit markets and the Fed's forecast of decreasing inflationary risk -- contributing to the dollar's weakness.