NEW YORK (AFP) - The dollar slumped to a near-record low against the euro Monday on feverish speculation the Federal Reserve will slash interest rates aggressively to bolster the battered US economy, dealers said.
The euro was at 1.4866 dollars around 2200 GMT, up from 1.4775 here late Friday. In earlier European trade, the 15-nation currency rose as high as 1.4914 dollars, within a whisker of its all-time peak of 1.4967 on November 23.
The dollar slipped to 108.17 yen from 108.81 Friday.
Speculation raced that the Fed would cut at least half a percentage point off the federal funds rate, currently pegged at 4.25 percent, at its next meeting on January 29-30, or even sooner.
Remarks by Fed chairman Ben Bernanke last week, in which he said the US central bank stood ready "to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," sent analysts scurrying to revise rate-cut estimates upward.
The Fed has lowered the key rate by a full percentage point in three moves since September.
Stephen Malyon, currency strategist at Scotia Capital, said the option market had priced in an over 44 percent chance that the Federal Open Market Committee (FOMC) will cut interest rates by three-quarters of a percentage point on January 30.
"With the FOMC meeting still two weeks away, rumors are also circling over the potential for an inter-meeting Fed cut," Malyon said.
"At this point it becomes very difficult to judge the likelihood of such an event; however whether they cut inter-meeting or not the theme remains the same: with US interest rates dropping faster than global rates, the US dollar is losing increasingly larger amounts of interest rate support."
For Ashraf Laidi at CMC Markets, the dollar is tumbling "against all major currencies as markets increasingly expect an aggressively dovish Federal Reserve to slash interest rates by at least 75 basis points in the next two months, with the probability of a 50 basis point rate cut before the next meeting also rising."
A strong Wall Street stocks rally spurred by investors' rate-cut hopes also weighed on the dollar.
"A triple-digit Dow Jones Industrial Average rally effectively fueled the dollar decline; rallying risky asset classes have recently forced the opposite move in the downtrodden US dollar," said David Rodriguez at Forex Capital Markets.
Meanwhile, the pound also fell to new lows against the euro on expectations the Bank of England will cut interest rates in February and again in the months ahead, albeit at a more cautious pace than the Fed.
Consumer price inflation figures, due Tuesday, will be key to those expectations, with analysts expecting benign price growth to allow further easing by the Bank of England.
In late New York trade Monday, the dollar was at 1.0927 Swiss francs, down from 1.1012 Friday.
The pound was at 1.9561 dollars, down slightly from 1.9564.
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