LONDON, Dec 9 - The dollar hit a record low against the euro for an eighth consecutive session on Tuesday as investors bet a U.S. central bank meeting later in the day would do little to halt the greenback's slide. With little expectation the Federal Reserve will raise rates from their current level of one percent, markets were focused on whether the Fed would drop a promise to keep rates low for "a considerable period". Ultra-low U.S. interest rates have dented the appeal of dollar deposits, encouraging capital to flow out of the United States precisely when the country needs to attract growing sums of overseas capital to fund its ballooning current account deficit. "The U.S. current account deficit is a structural issue that is not going to go away soon," said Trevor Dinmore, currency strategist at Deutsche Bank. "Speculative positions look stretched but corporates still want to hedge against dollar weakness, so there is scope for this move to go further." The dollar extended losses beyond $1.2265 to the euro in the European session, bringing it's fall to eight cents in the past month alone. The U.S. currency also hit a new seven-year low against the Swiss franc and its lowest against sterling since 1992, the aftermath of the "Black Wednesday" debacle that marked the British currency's ejection from the European Exchange Rate Mechanism.
HOW LOW CAN IT GO?
The greenback also fell below 107.15 yen , coming within a whisker of three-year lows set on Monday. The dollar's renewed decline raised questions as to how far the currency could fall before policymakers started to flex their muscles. In an interview with on Monday, U.S. Treasury Secretary John Snow declined to speculate about possible intervention to support the greenback and said faster growth was the key to helping the global economy. He repeated his backing for a strong dollar, a mantra that has little impact on markets these days. News that 31 U.S. soldiers had been wounded in a car bomb blast in Iraq only heightened concerns about Washington's handling of post-war Iraq, a factor that has exacerbated the dollar's slide. The blast came just a day after the Bank for International Settlements showed OPEC countries -- who traditionally recycle oil revenues into dollar assets -- brought more money home in the first six months of 2003 than in all of 2001 and 2002 combined. "It's about time we saw some correction. But it's hard to believe that the market's sentiment will suddenly change today," said Shogo Nagaya, foreign exchange manager at Nomura Trust & Banking in Tokyo. Markets will focus on the release of Germany's ZEW investor confidence index at 1000 GMT and the Richmond Fed business activity index at 1500 GMT ahead of the Fed's policy announcement at 1915 GMT. Speculation that the Fed could change the wording of its statement to prepare markets for a rate hike next year have faded in the wake of Friday's payrolls report which showed American employers hired far fewer workers than expected in November.//