Dollar hits new low versus euro
Concerns about the U.S. banking sector drive greenback to a record low against the 15-nation euro.
NEW YORK (CNNMoney.com) -- The dollar sank to a new all-time low against the euro Tuesday as concerns about the health of the U.S. banking sector and economy deepened. But the dollar bounced back slightly after Federal Reserve Chairman Ben Bernanke acknowledged that the dollar's weakness is a concern.
The 15-nation euro rose as high as $1.6038 in European trading, breaking through its previous high of $1.6018 set April 22. It has pulled back to $1.5880.
The British pound fell slightly against the dollar, buying $2.0018 from $2.0086.
The greenback gained slightly against the Japanese yen, moving to ¥104.86 from ¥103.59.
Bernanke told the Senate Banking Committee Tuesday morning that the dollar's fall has "contributed somewhat" to the increase in oil prices and has put "upward pressure" on business costs and consumer prices.
His comments had a calming effect on the markets and gave a boost to the dollar, according to Stephen Malyon, currency strategist at Scotia Capital.
However, Malyon thinks the boost is temporary and believes the dollar will remain under pressure from the crumbling housing market well beyond the second half of this year.
"We think the dollar is going to remain under some pressure for the next couple of quarters," Malyon said.
Fears about the volatile mortgage giants
Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), along with the government seizure of regional mortgage lender IndyMac (IMB) on Friday, have reignited credit worries.
Investors regard the bank failures, credit concerns and the crumbling housing market as a reason to bet against the dollar, according to Dustin Reid, currency strategist with ABN AMRO. He expects the situation will remain the same for the next few months.
"The short term look for the dollar now is pretty bearish. The market will need to recover from this risk aversion before we get a rebound," Reid said.
Shares of big banks Washington Mutual (WM, Fortune 500) and National City (NCC, Fortune 500) plummeted in Monday trading and later issued statements that they had enough capital to avoid the fate of IndyMac.
Bonds: Treasury prices rallied for a second consecutive day Tuesday after Federal Reserve Chairman Ben Bernanke gave a grim economic outlook. The benchmark 10-year note rose 10/32 to 100 15/32 and yielded 3.82%, down from 3.88% late Monday. (Full story)
Oil: Oil prices fell on Tuesday as investors feared a further decline in U.S. demand after hearing comments from Federal Reserve Chairman Ben Bernanke. Light, sweet crude fell $6.44 to settle at $138.74 a barrel in trading on the New York Mercantile Exchange. (Full story) 
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