Dollar Rebounds Against Major CurrenciesBy ERIN CONROY AP Business Writer© 2008 The Associated PressTOOLSEmail Get section feedPrint Subscribe NOWComments RecommendNEW YORK — The dollar slumped to a new low against the euro Tuesday but rebounded against major currencies after central banks in Britain, Europe and the United States announced a relief plan for stressed financial markets.The euro was pushed to a record $1.5495 on a better-than-expected reading of investor sentiment from Germany, Europe's biggest economy.The rise in the ZEW institute's monthly confidence index defied analyst predictions of a slight decline and sent the euro above the previous high-water mark of $1.5463, set Friday.But when the U.S. Federal Reserve, the European Central Bank and theDollar Rebounds Against Major CurrenciesDollar Rebounds Against Major Currencies | Chron.com - Houston Chronicle
© 2008 The Associated Press
NEW YORK — The dollar slumped to a new low against the euro Tuesday but rebounded against major currencies after central banks in Britain, Europe and the United States announced a relief plan for stressed financial markets.
The euro was pushed to a record $1.5495 on a better-than-expected reading of investor sentiment from Germany, Europe's biggest economy.
The rise in the ZEW institute's monthly confidence index defied analyst predictions of a slight decline and sent the euro above the previous high-water mark of $1.5463, set Friday.
But when the U.S. Federal Reserve, the European Central Bank and the Bank of England announced that they were joining with other central banks to provide more relief in the credit crisis, the euro slid to $1.5281.
The euro clawed back to $1.5319 in late New York trading _ below the $1.5352 it bought late Monday. The dollar also rose against the British pound, which fell to $2.0029 from $2.0101.
In other trading, the dollar climbed to 104.17 yen from 102.40 yen, and rose to 1.0337 Swiss francs from 1.0185 Swiss francs late Monday. The U.S. currency also edged up to 1.0067 Canadian dollars from 1.0024 Canadian dollars.
"The dollar is up quite a bit across the board after the announcement, and I think that's because the news is being looked at as helpful for capital and mortgage markets," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. "Some people feel it could remove pressure on the Fed to cut interest rates, and this has boosted a market that has gone into hibernation in the last couple of days."
Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York, agreed that the announcement pushed the euro lower because it all but eliminated the chance for a rate cut by the Fed before its next meeting.
"This coordinated central bank injection of liquidity totally cancels the changes of an inter-meeting rate cut for the Fed and this provides temporary support for the U.S. dollar," Laidi said. "As we know, rate cuts are bad for the U.S. dollar and inter-meeting rate cuts are very bad for the U.S. dollar."
The decision, he said, would allow the Fed to make "the anticipated 50 basis point rate cut on March 15." Currently, the Fed's interest rate stands at 3 percent _ compared with 4 percent for the euro zone, where the ECB has left rates unchanged since last summer.
Bank of England announced that they were joining with other central banks to provide more relief in the credit crisis, the euro slid to $1.5281.The euro clawed back to $1.5319 in late New York trading _ below the $1.5352 it bought late Monday. The dollar also rose against the British pound, which fell to $2.0029 from $2.0101.In other trading, the dollar climbed to 104.17 yen from 102.40 yen, and rose to 1.0337 Swiss francs from 1.0185 Swiss francs late Monday. The U.S. currency also edged up to 1.0067 Canadian dollars from 1.0024 Canadian dollars."The dollar is up quite a bit across the board after the announcement, and I think that's because the news is being looked at as helpful for capital and mortgage markets," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. "Some people feel it could remove pressure on the Fed to cut interest rates, and this has boosted a market that has gone into hibernation in the last couple of days."Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York, agreed that the announcement pushed the euro lower because it all but eliminated the chance for a rate cut by the Fed before its next meeting."This coordinated central bank injection of liquidity totally cancels the changes of an inter-meeting rate cut for the Fed and this provides temporary support for the U.S. dollar," Laidi said. "As we know, rate cuts are bad for the U.S. dollar and inter-meeting rate cuts are very bad for the U.S. dollar."The decision, he said, would allow the Fed to make "the anticipated 50 basis point rate cut on March 15." Currently, the Fed's interest rate stands at 3 percent _ compared with 4 percent for the euro zone, where the ECB has left rates unchanged since last summer.
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