Currencies: Dollar's on Top of the World After Rate Cut
The dollar was off and running overnight, gaining against major currencies the world over after the U.S.
Federal Reserve's
latest interest-rate cut.
While some market-watchers wanted rates cut by
50 basis points, rather than the 25 basis-point reduction they got, traders agree that yesterday's action should invite business and consumer spending, reinvigorating the economy -- which is bullish for the dollar.
The dollar peaked at new one-week highs against the euro and a fresh 10-week high against the yen. It lately cost $0.8496 to buy a euro; at yesterday's close, it cost $0.8589 per euro. The euro's lows were hit last fall, when it cost $0.82 euro per dollar.
European Central Bank
member Ernst Welteke said this morning that it would be difficult for the ECB to cut interest rates because economic growth is weak and inflation is high in the eurozone.
More dismal data from the eurozone preceded Welteke's comments: French business confidence fell to a two-year low in June.
Last week, better-than-expected inflation numbers last week from Germany, Europe's largest economy, had some speculating that the ECB might conclude that eurozone inflation was tapering -- possibly opening a door to rate cuts. The ECB meets next Thursday.
The yen also took a hit this morning against the dollar. Lately, it cost 124.66 yen to buy a dollar, more than the 124.36 yen per dollar it cost at yesterday's close. The
Bank of Japan
met earlier this morning and, as expected, left interest rates unchanged.
An article in this morning's
Wall Street Journal
quoted a senior Bush administration official as saying that the U.S. wants both the ECB and the BOJ to lower interest rates.
The euro slipped against the yen this morning; it lately cost 105.88 yen to buy a euro, less than the 106.87 yen per euro it cost when it closed yesterday.
The dollar gained on the second tier of major currencies as well, lately posting a price of C$1.5230 against the Canadian loony, up from C$1.5166 at its last close. The Australian dollar slipped to $0.5106 from $0.5190 yesterday. The British pound also felt the strength of the Fed's rate cut, slipping to $1.4086 most recently, from a price of $1.4171 at its last close.
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