[h1]Dollar under pressure as US outlook darkens[/h1]

By Richard Blackden and Ambrose Evans-Pritchard

Last Updated: 9:53am GMT 14/03/2008

The dollar remains under pressure against all major currencies on fears that the Federal Reserve may need to slash interest rates further to stop the downward spiral in the credit markets.
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The greenback was at 100.57 against the yen after breaking below 100 yesterday in a day of wild trading, that set off alarm bells at Japan's Keidanren industry lobby.
It touched a record low of $1.5651 against the euro and came within a whisker of parity with the Swiss franc for the first time in history.
It rebounded somewhat in London today and was trading at $1.5582 by mid morning.
However, Mitul Kotecha, head of currency strategy at Credit Agricole, said: "The real risk remains that we get a dollar rout. The news from from the US is consistently negative and investors are actually not overly long euros."

The dramatic slide in the US currency prompted strategists at Goldman Sachs and Morgan Stanley today to go on 'intervention watch' on expectations the world's central banks may consider stepping into to halt the decline.
Yesterday's plunge came amid an investor flight into commodities, seen as a way of insulating wealth from the dollar's decline. In the US, crude oil reached a record $111 a barrel despite rising inventories.
A shock fall of 0.6pc in February retail sales cemented fears that the US is sliding into a fully fledged recession. The markets are now pricing in a three-quarter point cut in rates to 2.25pc next week.
The European Central Bank has so far refused to blink, holding rates at 4pc since the credit crunch began. The result is a yawning transatlantic yield gap, drawing huge sums of hot money into Europe.
"We're in the eye of the dollar storm," said David Bloom, currency chief at HSBC. "The last phase of a sell-off is always the most extreme. We think the dollar will recover in the second quarter. People are treating the euro as if it was the D-Mark. They are looking at how well German exports are doing, but ignoring the weakness in Italy and Spain.
"This is a big mistake. We will soon see contagion from the US, and then both sterling and the euro will be in trouble," he said.
Peter Schiff, a dollar-bear at Security Pacific Capital, said the greenback faced the danger of outright collapse as countries in Asia and the Middle East mull plans to break their dollar pegs, which are fuelling inflation across the region. "The decline could accelerate rapidly. The world is still holding a lot of dollars it doesn't need," he said.
The dollar's tumble over the past 10 weeks has begun to provoke murmurs from top central bankers, suggesting that we may be nearing official intervention. Japan is alarmed by a 24pc surge in the yen since last autumn, fearing it will tip the country back into slump. "It is hurting profits at small firms rapidly, " said the economy minister, Hiroko Ota.
The Bank of Japan has cautioned against of "excessive exchange rate moves". The wording is identical to that used this week by ECB chief Jean-Claude Trichet, himself under pressure from Latin bloc politicians to halt the euro's rise.
Hans Redeker, head of currencies at BNP Paribas, said the central banks may soon spring a trap on the markets, clubbing together to boost the dollar. The aim would be to chill the commodities, bringing down energy and food prices. "Shaking out speculators would be an indirect way of reducing the inflation impact from raw materials," he said.
On Wall Street, the Dow Jones index at first dropped hard on fears of hedge losses as Carlyle Capital failed to stave off default and others faced draconian margin calls. The markets rebounded on a report from Standard & Poor's that losses on the sub-prime mortgage debt may prove no more than $285bn, below more extreme numbers in vogue.