The Dow dropped well below the 11,000 mark as Fed Chairman Bernanke warned that the economy faces numerous difficulties.
Bernanke told Congress the U.S. economy is faced with "numerous difficulties," such as strains in financial markets, a shaky job market and ongoing weakness in the housing market. These difficulties are persisting despite the Fed's massive interest rate cuts and expanded lending efforts over the past year.
U.S. officials' comments come only days after the Fed and the Treasury said they would lend financial support to mortgage financiers Fannie Mae and Freddie Mac if necessary. The well-being of the government-chartered companies has drawn Wall Street's attention in recent weeks as the companies together hold or guarantee more than $5 trillion in mortgages -- nearly half the nation's total.
Investors are worried about a number of things - among them the weak dollar that just hit another new low according to Bloomberg.
"The markets are reacting negatively to the renewed credit crisis in the U.S. and that's hurting the dollar across the board," said Roberto Mialich, a Milan-based currency strategist at Unicredit Markets & Investment Banking, a unit of Italy's largest lender. "The market is speculating that Bernanke will offer a gloomy outlook for the U.S. economy."
The dollar fell to $1.6038 per euro, the lowest since the euro's inception in 1999, and was at $1.6006 as of 7:22 a.m. in New York, from $1.5908 yesterday. The U.S. currency also dropped to 104.61 yen, the lowest level since June 9, from 106.14 yen yesterday. The yen traded at 167.69 per euro, from 168.89 yesterday, when it weakened to 169.75, the lowest since the single currency's debut.
The dollar may fall to between $1.62 and $1.63 in the coming month, Mialich said.
Lately its been financial stocks getting the biggest drubbing. Stocks opened lower and they have remained in negative territory so far this monring.
Josh Landis and Mitch Butler of the "Fast Draw" team take a close look at what determines the price of oil and the impact price fluctuations have on the overall U.S. economy. The main factor driving up the prices is falling value of the U.S. dollar. Since 2001 the value of the U.S. dollar has been plunging against currencies like the Euro. Speculators also help to drive up oil prices.
What's happening to the dollar? It is worth less today than the loonie and the Euro seems to be increasing its value over the dollar each day. Lindsay Campbell from Wallstrip tries to hand some out dollars in this humorous video clip but she has trouble finding takers. You can track the latest currency rates here on Bloomberg.com.
Greenspan Says Euro Could Replace Dollar as Reserve Currency
The Associated Press reports that former Fed Chairman Alan Greenpsan has warned that euro could replace the U.S. dollar as the reserve currency of choice.
The euro has been soaring against the U.S. currency in recent weeks, hitting all-time high of $1.3927 last week as the dollar has fallen on turbulent market conditions stemming from the ongoing U.S. subprime crisis. The Fed meets this week and is expected to lower its benchmark interest rate from the current 5.25 percent.
Greenspan said that at the end of 2006, some 25 percent of all currency reserves held by central banks were held in euros, compared to 66 percent for the U.S. dollar.
In terms of being used as a payment for cross-border transactions, the euro is trailing the dollar only slightly with 39 percent to 43 percent.
The U.S. dollar has been falling against the euro, British Pound, Canadian Dollar and other currencies during the Bush administration. A few good resources to find exchange rate data are x-rates.com, Bloomberg and XE.com. If you search Google for Euro you will also receive current information about the value of the euro compared to the U.S. dollar.
The Associated Press 
