THE US dollar hit a 15-year low against a basket of major currencies for the fifth consecutive day

THE US dollar hit a 15-year low against a basket of major currencies for the fifth consecutive day yesterday as investors braced for an expected Federal Reserve interest rate cut next week.

The greenback which also set record lows versus the euro and three-decade troughs against the Canadian dollar has been under pressure since Friday, when an unexpectedly weak US jobs report fuelled speculation that the Fed may cut rates by as much as 50 basis points on September 18 from the current 5.25 per cent.

The unexpected fall in US employment levels suggested that the US economy may be hit more than previously expected by the turmoil in financial and credit markets, which spiralled out from troubles in the US sub-prime mortgage sector.

Dollar weakness "has been the strong trend for the past few days, ever since we got the payrolls number. The market is now pricing in the fact that what we are seeing in financial markets ... is probably going to be a lot more negative for the US economy than economies elsewhere," said Adarsh Sinha, currency strategist at Barclays Capital.

"We think that further (dollar) weakness is likely ahead."

By 1058 GMT, the US dollar index had fallen to 79.302 its lowest since 1992, when it had set an all-time trough of 78.19. It last traded at 79.529.

The euro set a record high of US$1.3927, according to Reuters data, before easing back to US$1.3886.

The US dollar was down a third of a per cent at C$1.0334, just off an earlier 30-year low at C$1.0316.

One exception though was the yen, which lost ground broadly, including against the US dollar.

Analysts cited short-term positions adjustments as well as political uncertainty after Prime Minister Shinzo Abe's shock announcement on Wednesday that he will step down.

The yen was down 0.4 per cent against the euro at 159.41 . It fell 0.6 per cent versus the US dollar to 114.76.

The Swiss franc was steady versus the euro ahead of a Swiss National Bank rate decision. Most economists expect the SNB to hold rates at 2.5 per cent, but a sizeable minority are expecting a 25 basis point hike.

"We believe the SNB will indeed tighten, which given the uncertainty over the outcome, could see Swiss franc gains," ING said in a research note for clients.

The high-yielding Australian and New Zealand dollars both slipped yesterday, partly after data showed retail sales in New Zealand were flat in July from a month earlier compared with forecasts for a 0.2-per cent increase.

The report followed the Reserve Bank of New Zealand's decision to keep rates on hold at 8.25 per cent, the highest among developed economies, with the central bank acknowledging signs of slowing demand but saying inflation remained a worry.

Elsewhere, sterling fell to a six-month low against the euro as weak UK housing data added weight to expectations that UK interest rates have peaked.

Reuters