FED interest rate cut to 4.5 pc hits Dollar and boosts Sterling
The US dollar skidded to a new low against the euro yesterday while the British Pound broke through $2.08 after the Federal Reserve lowered a key interest rate by a quarter percentage point to 4.5 %.
The Canadian currency bought more than $1.60 for the first time since 1957. The 13-nation euro soared to $1.4503, its fourth new high in as many trading days, while the British pound bought $2.0813, after having hit a high of $2.0822
The Fed's statement was intended to signal a continued openness to cutting rates, while indicating that inflationary pressures made doing so risky. Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
Currency traders are not buying into the relative hawkishness cropping up in this month's statement. While the outlook for the Fed is between further rate cuts and no rate cuts ... rates will remain unchanged if not go up for foreign banks, causing currency traders to drop the dollar.
The rate-cut announcement, while expected, drove the dollar down, even as new U.S. data showed the economy grew at a 3.9 % pace in the third quarter, the fastest pace in 1 1/2 years. A second report showed that construction spending rose 0.3 % in September, the best showing in four months.
The euro, the Canadian dollar and the Pound have been climbing steadily against the dollar, regularly touching new highs since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.
The euro has been helped by sentiment that the European Central Bank has yet to finish a gradual campaign of rate increases, while the pound has benefited from expectations that the Bank of England will leave rates untouched rather than follow the Fed in cutting the cost of borrowing.
The Canadian dollar, a commodity-backed currency, has benefited as oil prices soared and demand for Canada's exports increases.
In other trading, the dollar rose against the Japanese currency, climbing to 115.31 yen from 114.77 yen. However, the dollar slid against the Swiss franc to 1.1565 from 1.1600. Rates remain on hold at 0.5% in Japan.
Prices at the London open
GBPUSD – 2.0801
GBPEUR – 1.4373
EURUSD – 1.4468
GBPJPY – 240.22
GBPCHF – 2.4102
GBPAUD – 2.2286
GBPCAD – 1.9658
GBPZAR – 13.4263
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
The Canadian currency bought more than $1.60 for the first time since 1957. The 13-nation euro soared to $1.4503, its fourth new high in as many trading days, while the British pound bought $2.0813, after having hit a high of $2.0822
The Fed's statement was intended to signal a continued openness to cutting rates, while indicating that inflationary pressures made doing so risky. Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
Currency traders are not buying into the relative hawkishness cropping up in this month's statement. While the outlook for the Fed is between further rate cuts and no rate cuts ... rates will remain unchanged if not go up for foreign banks, causing currency traders to drop the dollar.
The rate-cut announcement, while expected, drove the dollar down, even as new U.S. data showed the economy grew at a 3.9 % pace in the third quarter, the fastest pace in 1 1/2 years. A second report showed that construction spending rose 0.3 % in September, the best showing in four months.
The euro, the Canadian dollar and the Pound have been climbing steadily against the dollar, regularly touching new highs since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.
The euro has been helped by sentiment that the European Central Bank has yet to finish a gradual campaign of rate increases, while the pound has benefited from expectations that the Bank of England will leave rates untouched rather than follow the Fed in cutting the cost of borrowing.
The Canadian dollar, a commodity-backed currency, has benefited as oil prices soared and demand for Canada's exports increases.
In other trading, the dollar rose against the Japanese currency, climbing to 115.31 yen from 114.77 yen. However, the dollar slid against the Swiss franc to 1.1565 from 1.1600. Rates remain on hold at 0.5% in Japan.
Prices at the London open
GBPUSD – 2.0801
GBPEUR – 1.4373
EURUSD – 1.4468
GBPJPY – 240.22
GBPCHF – 2.4102
GBPAUD – 2.2286
GBPCAD – 1.9658
GBPZAR – 13.4263
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: FED, interest rates, Sterling, US Dollar
posted by Wise Money @ 9:19 AM
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