Dollar Falls on Concern Rate Cuts Haven't Restored U.S. Growth
By Kanako Chiba and Mari Murayama
Tokyo, Nov. 7 (Bloomberg) -- The dollar fell on concern the Federal Reserve's rate cut campaign has produced little sign of an economic recovery and there is not much left the Fed can do to restore growth.
The U.S. currency declined after the Fed reduced the benchmark interest rate to a 40-year low of 2 percent, the 10th cut this year and the longest series of reductions since 1991.
``The Fed doesn't have much space left to ease its monetary policy anymore,'' said Mitsuru Sahara, a vice president for foreign exchange at Sanwa Bank Ltd. ``That's working against the dollar.''
The dollar weakened to a three-week low of 120.85 yen from 121.24 in late New York yesterday. Against the euro, it weakened to 89.84 U.S. cents from 89.47.
The dollar was also hurt by a Fed statement saying the economy may be slow to recover from the Sept. 11 attacks.
``Concerns about a deterioration in business conditions both here and abroad are damping economic activity,'' the Fed said in announcing its decision.

Severe Outlook ``The fact the Fed cut by half a percentage point and still suggested it will cut again means they have a very severe outlook for the economy,'' said Toru Umemoto, a currency strategist at Morgan Stanley Dean Witter & Co.
The statement led 30 economists surveyed by Bloomberg News to say they expect a quarter-point cut at the Fed's Dec. 11 meeting. Two others expect a half-point reduction and 10 say the Fed will hold rates steady.
The economy's third-quarter 0.4 percent contraction was the first since 1993. If analyst expectations of an additional GDP decline in the current quarter prove correct, that would mark the first recession since 1990-91, based on the conventional definition of two straight quarters of contraction.
The dollar's decline against the euro may be limited on concern the European Central Bank, which meets tomorrow, isn't likely to cut interest rates enough to boost growth. The ECB has sliced rates three times this year to 3.75 percent.
``The ECB is seen moving too slowly, and should the bank lower the rates by only a quarter percentage point tomorrow, that will disappoint the market,'' said Masanori Hirabayashi, a foreign exchange trading manager at Shinsei Bank Ltd. ``The Fed is way ahead of the ECB.''
Reports yesterday that German unemployment had the biggest rise in almost three years in October added to pressure on the ECB to trim interest rates to avert a recession. A separate report showed consumers and businessmen in the dozen countries sharing the euro grew more pessimistic last month.

Won't Do Much
All but one of the 24 economists surveyed by Bloomberg News on Friday predict a cut of at least 25 basis points Thursday.
``A quarter percentage point rate cut won't do much to help the economy rebound,'' said Sanwa's Sahara.
The International Monetary Fund yesterday pressed the ECB to lower rates to jumpstart the euro-area economy, which came to ``a virtual standstill'' even before the Sept. 11 terrorist attacks in the U.S., the IMF said.
Low inflation and balanced budgets offer Europe's central bank a chance to reduce borrowing costs to boost growth, the IMF said in its annual economic review of the region.
In other trading, the dollar fell to 1.6400 Swiss francs from 1.6458 francs in late New York. The British pound rose to $1.4638 from $1.4573.