January 22nd, 2008
The US Federal Reserve has cut interest rates to 3.5%, a shock three-quarters of a percentage point reduction. The Fed, the US central bank, said latest figures indicated a deepening of the country’s housing market slump and increased unemployment levels.
Global stocks rebounded with most European indexes closing higher, while Wall Street regained some ground.
One analyst said the Fed was “obviously panicked” by the threat of recession following Monday’s global share slide.
“Unfortunately they have no power to reverse what in my opinion is the worst post-war recession,” said Michael Metz, chief investment strategist at Oppenheimer in New York. Read more from bbc.co.uk
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January 22nd, 2008
The Federal Reserve’s emergency rate cut on Tuesday drew a mixed response on Wall Street, though the move increased the odds of more reductions, including a possible half-point cut at next week’s regular policy meeting.
The Fed on slashed a key interest rate by a hefty three-quarters of a percentage point, the biggest cut in more than 23 years, after a two-day global stocks rout sparked by fears of a U.S. recession.
The move, a rare one made between the U.S. central bank’s regularly scheduled meetings, took the federal funds rate governing overnight lending between banks down to 3.5 percent, its lowest level since September 2005. The Fed also lowered the discount rate it charges on direct loans to banks to 4 percent. Read more from cnbc.
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January 22nd, 2008
The dollar fell against the euro after the Federal Reserve made an emergency cut in interest rates for the first time in seven years.The currency’s decline was muted on speculation the 75- basis-point reduction in the target overnight rate will fail to halt a worsening global economic slowdown. The dollar’s drop was also limited as investors seeking the relative safety of government debt bought Treasuries. Global stocks plummeted.
“There’s still a lot of pessimism out there,'’ said Robert Fullem, vice president of U.S. corporate foreign-exchange sales in New York at Bank of Tokyo-Mitsubishi UFJ Ltd. The rate cuts are “definitely negative for the dollar'’ but “didn’t change the longer-term picture'’ for the global economy. Read more from Bloomberg.
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January 16th, 2008
The euro fell the most in a month against the dollar after European Central Bank council member Yves Mersch cited “downside risks'’ to the region’s economic growth.Traders sold euros as the comments fueled speculation the ECB will join the Federal Reserve in cutting interest rates this year. Yesterday, the euro rose to within one U.S. cent of a record high as traders bet the ECB would hold rates steady or even lift borrowing costs to control inflation.
“Mersch’s comment is a wake-up call,'’ said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments LLC in Boston. “It does raise the chance for a rate cut from the ECB; the market was so complacent with the view that the euro is bulletproof.'’ Read more from Bloomberg.
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January 16th, 2008
The dollar sank to a 2 1/2- year low against the yen Wednesday in Asia as investors sold the greenback due to concerns over the U.S. economy and financial system.The dollar was trading at 105.98 yen at midafternoon Wednesday, down from 107.07 yen late Tuesday in New York and hitting the lowest levels since May 2005. The euro rose to US$1.4842 from US$1.4833.
Traders said the dollar could slip further due to persistent pessimism over earnings from U.S. financial institutions and U.S. economic data to be released later in the day. Read more from International Herald Tribune.
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January 16th, 2008
The dollar fell to a 2 1/2-year low against the yen as losses in credit markets widened and the U.S. economy showed more signs of sinking into recession.The U.S. currency also dropped to a record low against the Swiss franc on analysts’ expectations U.S. financial companies including Merrill Lynch & Co. will follow Citigroup Inc. in writing down the value of investments linked to U.S. mortgages. The yen climbed against the South African rand and the New Zealand dollar as a slump in global stocks prompted investors to reduce carry trades funded with cheap loans from Japan. Read more from Bloomberg.
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January 2nd, 2008
EU newcomers Cyprus and Malta adopted the euro Tuesday, bringing to fifteen the number of countries using the currency with increasing clout over the slumping U.S. dollar.The Mediterranean islands, both former British colonies, scrapped the Cyprus pound and Maltese lira at midnight local time.
Maltese Prime Minister Lawrence Gonzi had to wait a little before getting his hands on the new currency. An automated teller machine did not work when Gonzi tried to withdraw euros, and he was obliged to use a different ATM.
“We are the smallest member state of the European Union, but we are proud,” he said. Read more from CNN Money.
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January 2nd, 2008
The dollar fell on Wednesday as crude oil hit $100 a barrel and a gauge of U.S. manufacturing tumbled last month to its lowest level since April 2003, increasing expectations for more Federal Reserve interest rate cuts.Crude oil prices shot 4 percent higher on tight energy stockpiles and prompted investors to close risky trades, such as those financed by borrowing cheaply in yen. That accelerated the dollar’s drop against the Japanese currency, with the decline at one point extending past 2 percent, its largest one-day percentage drop since Feb 27, according to Reuters data. Read more from Reuters.
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January 2nd, 2008
The dollar softened further after the US manufacturing ISM indicator showed an unexpected contraction in activity in December, suggesting the US economic slowdown is broad-based. The ISM fell to 47.7 from 50.8 in November and against expectations for a small rise to 50.9. Both the new orders and production components fell below the 50 mark, indicating a reduction in activity. ‘The ISM is consistent with a recession not only in the factory sector but possibly the wider economy as well,’ said Paul Ashworth at Capital Economics. It is surprising because the US economic weakness is centred on housing and consumption and because the boost from strong overseas demand and the weaker dollar should be insulating the factory sector from the worst of the property market fallout. ‘In short, this is a big shock that greatly increases the chances of another interest rate cut at the end of this month particularly if, as we now suspect, December’s payrolls figures turn out to be equally as disappointing on Friday,’ Ashworth said. The data pushed the dollar down to 110.50 yen from 111.20 yen and allowed the euro to move back above the 1.4700 usd level. Elsewhere, the pound remained broadly weaker after a drop in the UK manufacturing PMI this morning. The figure for December dropped to 52.9 from November’s 54.3. Read more from Quote.com
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January 2nd, 2008
The dollar fell against the euro, extending last year’s 10 percent decline, on speculation a slowdown in U.S. manufacturing will give the Federal Reserve more reason to lower interest rates.The dollar dropped near the lowest in three weeks versus the yen on speculation the Institute for Supply Management will say today that factories expanded production at the slowest pace in 11 months in December. The U.S. currency weakened against 13 of the 16 most actively traded currencies as traders bet the central bank will reduce borrowing costs at least twice in 2008. Read more from Bloomberg.
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