Your Financial Window

The US dollar weakened against the euro yesterday after Lehman Brothers said it intended to file for bankrupt¬cy and traders speculated the Federal Reserve might need to cut interest rates.

According to Bloomberg, the greenback dropped to its lowest in almost two months against the yen on reports American International Group (AIG) is seeking capital to avoid credit downgrades, spurring investors to reduce holdings of higheryielding assets financed in Japan. US stock futures and Asian shares slumped, while Treasuries rallied.

"It's highly likely that the Fed will have to cut interest rates again," said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, Australia's biggest life insurer, which oversees about US$14 billion (Bt483 billion) of assets. "That's negative for the US dollar. Investors will be look¬ing around at other vulnera¬ble US financial institutions."

The dollar declined to $1.4481 per euro, the lowest since September 4, before trading at $1.4401 later in London. It was $1.4224 in New York late last week, hav¬ing touched $1.3882 on September 11, the strongest level for a year.

The US currency yesterday dropped 2.1 per cent to ¥105.64, having earlier reached ¥105.27, the lowest since July 17. The currency is headed for the biggest oneday decline against the yen since August 16, 2007, when a global stock rout prompted investors to reduce socalled carry trades.

The dollar fell against all of the 16 mostactive currencies as Lehman said it planned to file a Chapter 11 petition in the US Bankruptcy Court for the Southern District of New York.

The ICE's Dollar Index, a gauge measuring the dollar against currencies of six US trading partners, slipped 1.2 per cent to 78.021, the lowest since September 4, on con¬cern that creditmarket loss¬es will spread to other finan¬cial institutions.

AIG, trying to stave off cred¬it downgrades that would force it to post more than $13 billion in collateral, is seeking capital from buyout firms Kohlberg Kravis Roberts and JC Flowers, said a person familiar with the situation yesterday. The insurer is seeking $40 billion from the Fed, the New York Times reported.

Bank of America said yes¬terday that it had agreed to acquire Merrill Lynch, the world's biggest brokerage firm, for about $50 billion, after shares in Merrill plum¬meted over the past week.