Dollar trades mostly lower, but rises vs pound

Monday, December 29, 2008 5:41 PM CST

NEW YORK (AP) 12/29/08 - The dollar was mostly lower Monday, but gained versus the pound in light holiday-week trading.

The 15-nation euro rose to $1.4238 in morning trading in New York from $1.4067 in New York late Friday.

The British pound, meanwhile, dipped to $1.4578 from $1.4677 late Friday as it circled parity with the euro. The pound hit its most recent record low of euro1.0198 in morning trading Monday.

The pound traded as high as euro1.3620 - and $1.9982 - at the beginning of the year. It has dropped in value against the dollar and the common currency as Britain faced a contracting economy and the Bank of England chopped interest rates from a peak of 5.75 percent to a more than 50-year low of 2 percent.

Interest rates in the euro zone remain at 2.5 percent. The European Central Bank cut rates by 0.75 percentage points earlier this month.

Cutting interest rates can undermine a currency as investors transfer funds to earn higher returns.

The Federal Reserve has cut its key federal funds rate from 4.75 percent in Sept. 2007 to its current range of 0.25 percent to zero, the lowest level on record.

The buck slipped to 90.15 Japanese yen from 90.58 yen.

The dollar moved amid thin holiday liquidity on a day with no scheduled data to guide trading. Later this week, reports on U.S. home prices and manufacturing are expected to shed more light on the U.S. recession.

In other New York trading Monday, the dollar dipped to 1.0429 Swiss francs from 1.0675, and edged lower to 1.2175 Canadian dollars from 1.2221.

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