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| Euro rises against dollar, yen firms after rate cuts |
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Time is GMT + 8 hours
Posted: 9-Oct-2008 06:43 hrs |
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| A euro coin and one US dollar bill. The euro firmed against the dollar Wednesday, boosted by concerns about US economic woes and concerted interest rate cuts by major central banks aimed at easing a global credit squeeze. |
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The euro firmed against the dollar Wednesday, boosted by concerns about US economic woes and concerted interest rate cuts by major central banks aimed at easing a global credit squeeze.. The euro was at 1.3663 dollars around 2100 GMT, up from 1.3599 dollars late Tuesday.. The dollar was at 99.42 yen, down from 101.38 Tuesday.. The greenback fell below 100 yen for the first time since April 1, earlier sliding as low as 98.61 yen.. The euro also fell sharply against the Japanese currency, to 135.85 yen from 137.18 yen, and hit its lowest level since August 2005 at 134.17 yen.. "The Federal Reserve, in coordination with other central banks, has been taking a number of actions to stabilize financial markets. However, the US economy will continue to face substantial challenges including further job losses, high energy prices and a rapid deleveraging in the financial sector," said Antonio Sousa at Forex Capital Markets.. "The Japanese yen could be the main beneficiary of the credit crisis and we expect more USD/JPY weakness going forward," Sousa said.. Dealers said the yen found support on the view the Japanese economy and banks would remain relatively untouched by the credit crunch that has forced governments into increasingly more drastic efforts to save their economies.. In the latest such move -- which again generated only a brief respite from the turmoil -- the Fed, the European Central Bank and four other central banks cut rates by a half a percentage point.. The joint action helped the euro for a while against the dollar, but it then slipped back as gains on stock markets faltered and reversed sharply as investors rushed for the exit.. A massive British government stabilization package for the banking system had only a passing impact on the turmoil, as did moves by other European countries desperately trying to halt the confidence spiral.. Dealers said there was growing concern that despite the measures being taken, the crisis showed no signs of abating -- instead it was intensifying, with huge losses on the stock markets and banking systems under pressure.. The half-point rate cuts "are clearly welcome and may provide a temporary boost to confidence but we believe that the banks still have a lot more work to do," said Julian Jessop at Capital Economics. "After all, today's rate cuts are only the latest in a series of extraordinary policy actions in the last few weeks and months, including massive injections of liquidity and the partial nationalisation of large parts of the financial system," Jessop added.. "The crisis has a lot further to run and, for the currency markets, this seems to mean a much stronger yen," Steve Barrow, senior currency strategist with Standard Bank in London, told Dow Jones Newswires.. Speculators have for years been taking advantage of Japan's cheap credit to borrow the low-yielding yen and then use it to fund higher-yield investments in other currencies -- a market bet known as a "carry trade.". But in the current turmoil, investors have been getting rid of these riskier holdings, strengthening the Japanese currency.. "Yen buying is likely to continue for now as there are surely no factors to support the dollar," said Hironobu Hagi, deputy general manager at the capital markets division of Shinsei Bank.. The pound hit its lowest level since April 2006, at 1.7277 dollars, amid deepening problems in the British economy.. In late trade, the pound was exchanged at 1.7299 dollars, down from 1.7466 Tuesday.. The dollar fell to 1.265 Swiss francs from 1.1389. — AFP
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