News Financial

The dollar slumped across the board after a report showed the nation¡¯s manufacturing activity slowed to its lowest level since April 2003, raising expectations for more interest rate cuts from the Federal Reserve this year.

US manufacturing ISM index unexpectedly dropped from 50.8 to 47.7 in December, adding to concern that the broad economy may cool down following subprime meltdown. However, the ISM price index increased from 67.5 to 68, suggesting inflation pressures remain.

Interest rate futures showed traders have fully priced in a quarter-percentage point to 4.00% by the Fed at its January 30 policy meeting.

The greenback extended its losses broadly after a report showed the nation¡¯s housing market deterioration has not ended yet. The dollar posed for the biggest weekly decline versus the euro.

US new home sales fell from 728k to 647k in November, the lowest level in 12 years. The weak data added to concern that the slowing housing market and tight credit market may impede the growth of the whole economy. The Fed is widely expected to lower interest rates by another quarter-percentage point to 4.00% at its January 30 policy meeting.

Another US report came out better than expected but did little to lift sentiment over the dollar. Chicago PMI rose from 52.9 to 56.6 in December, above the estimate of 52.5.

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