May 1 (Bloomberg) -- The Federal Reserve may cut interest rates to 1 percent as U.S. housing foreclosures worsen, said Mark Mobius, who oversees $47 billion in emerging-market equities at Templeton Asset Management Ltd.
Mobius added that the dollar's slide, down more than 7 percent against the euro and yen this year, is likely to slow because its ``completely bombed out.'' The Fed yesterday reduced the target rate for overnight loans between banks by a quarter point to 2 percent and said the economy remains weak amid the worst housing contraction in a quarter-century.
``I was looking at 1 percent a few months back. I still adhere to that,'' Mobius, executive chairman at Templeton Asset Management, said in an interview with Bloomberg Television today. ``I don't think the fear is over. You're going to continue to get more pressure on them to lower and lower.''
Fed policy makers have cut the benchmark rate by 2.25 percentage points in 2008, including two three-quarter point cuts. Treasury Secretary Henry Paulson said yesterday the credit crisis, now in its ninth month, probably is more than half over, and retained his forecast for the U.S. economy to keep growing.
Even with continuing U.S. interest rate cuts, the dollar's slide against other currencies may slow and its ``devaluation'' may end, said Mobius.
``I think probably everybody has discounted it by now,'' said Mobius. ``So the dollar may stabilize at this level or it may go a little lower.''
Asian currencies, including the yuan and India's rupee are still undervalued against the dollar, said Mobius, who said the China's foreign-exchange rate may rise another 5 percent. The Chinese currency has risen 10.3 percent against the dollar in the past year, according to data compiled by Bloomberg.
``Very often these things overshoot,'' Mobius said today.
