Slowdown worries pummel dollar

More signs of cooling economic growth send greenback to 20-month low versus euro; Treasury prices surge.

NEW YORK ( -- Worries about the slowing U.S. economy sent the dollar down to a 20-month low versus the euro and lifted bonds Thursday.

The dollar also fell to a 14-year low against the British pound and tumbled versus the yen.

The Fed has held interest rates steady at its last three meetings.

In afternoon trading, the euro bought $1.3246, up from $1.3152 late Wednesday. The dollar bought ¥115.74, down from ¥116.35 the previous session.

A slew of reports showing the world's largest economy is cooling sparked the slide in the dollar as currency traders worried the Federal Reserve would have to start cutting interest rates to reinvigorate growth.

The possibility of a rate cut from the Fed has pummeled the dollar in recent weeks. Falling rates in the United States make it a less attractive place for investment when compared to rising rates in Britain and the euro zone.

The report to incite the most concern was one showing a decline in business activity in the Midwest. The National Association of Purchasing Management-Chicago said its measure of activity fell unexpectedly to 49.9 from 53.5 in October.

A measure below 50 indicates contraction.

The regional business activity report, along with a favorable reading on inflation, helped boost Treasury prices.

The inflation component of a report on personal income and spending showed consumer prices, excluding food and energy, rose 0.2 percent in October, about in line with expectations.

The benchmark 10-year note climbed 15/32, or $4.69 on a $1,000 note, to yield 4.46 percent, down from 4.52 late Wednesday.

The 30-year bond surged 28/32, or $8.75 on a $1,000 note, to yield 4.56 percent, down from 4.61 in the previous session. Bond prices and yields move in opposite directions.

The five-year note jumped 9/32 to yield 4.45 percent, while the two-year note gained 4/32, yielding 4.63 percent.

Investors also took in a report on weekly jobless claims that came in above forecasts.

Initial jobless claims for the week ending Nov. 25 rose to 357,000, higher than analysts' estimates of 316,000 and last week's figure of 323,000.

--from staff and wire reports

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