The dollar sank to a two-month low against a basket of currencies on Wednesday after the Federal Reserve cut benchmark interest rates a half percentage point and warned more may be needed to support the faltering U.S. economy.
The move comes just eight days after the U.S. central bank unexpectedly cut its lending rate by three quarters of a point to boost an economy battered by a deep housing slump and a persistent credit crisis.
"The language in the (Fed's) statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy," said Mark Meadows, analyst at Tempus Consulting in Washington, D.C.
Dealers reacted by pushing the New York Board of Trade's U.S. dollar index, which measures the greenback against a basket of six major currencies, to a two-month low.
The euro surged 0.8 percent to $1.4906, not far from its all-time high around $1.4967, according to Reuters data, before easing to $1.4877. Sterling lunged higher by more than a cent and last traded up 0.1 percent at 1.9914.
STRIKING A BALANCE
Some economists have also worried about the inflationary impact of the Fed's aggressive monetary policy easing campaign, especially given the dollar's weakness in recent months.But for now, analysts said the Fed was more concerned with keeping the U.S. economy out of recession.
Some analysts said the Fed's aggressive action puts it ahead of the curve, and the dollar may rebound if the economy starts to gain traction and avoids falling into recession.
Recent U.S. data has been mixed. Figures on home sales and prices have been dismal, and a report on Wednesday showed the economy in 2007 grew at the slowest pace in five years.
Story contributed by Guardian: Read More
The move comes just eight days after the U.S. central bank unexpectedly cut its lending rate by three quarters of a point to boost an economy battered by a deep housing slump and a persistent credit crisis.
"The language in the (Fed's) statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy," said Mark Meadows, analyst at Tempus Consulting in Washington, D.C.
Dealers reacted by pushing the New York Board of Trade's U.S. dollar index, which measures the greenback against a basket of six major currencies, to a two-month low.
The euro surged 0.8 percent to $1.4906, not far from its all-time high around $1.4967, according to Reuters data, before easing to $1.4877. Sterling lunged higher by more than a cent and last traded up 0.1 percent at 1.9914.
STRIKING A BALANCE
Some economists have also worried about the inflationary impact of the Fed's aggressive monetary policy easing campaign, especially given the dollar's weakness in recent months.But for now, analysts said the Fed was more concerned with keeping the U.S. economy out of recession.
Some analysts said the Fed's aggressive action puts it ahead of the curve, and the dollar may rebound if the economy starts to gain traction and avoids falling into recession.
Recent U.S. data has been mixed. Figures on home sales and prices have been dismal, and a report on Wednesday showed the economy in 2007 grew at the slowest pace in five years.
Story contributed by Guardian: Read More
