The U.S. dollar dropped against three other major currencies for the first time in three days today after George W. Bush said that U.S. may enter a long and painful recession period if the necessary measures arent taken soon.
Current macroeconomic indicators in combination with the Bushs speech suggest that the $700 billion rescue plan for the financial system may also include interest rate cuts by the Federal Open Market Committee. Speculations about the rate cut pushed dollar down against all actively traded world currencies today.
Current situation in the U.S. economy is critical according to the market analysts. Even if the anti-crisis measures prove to be helpful and economy will return to the healthy state, the restoration of the confidence in the U.S. dollar will require something else.
The chances that the Federal Reserve will reduce its target funds rate on its next meeting on October 28-29 reached 80 percent according to the futures contracts on the Chicago Board of Trade yesterday. The odds grew up from 58 percent seen on September 23.
EUR/USD went up from 1.4615 to 1.4716 as of 9:26 GMT today, reaching 1.4767 rate at its peak. GBP/USD rose from 1.8471 to 1.8609 with a daily maximum at 1.8668. USD/JPY fell from 106.18 to 105.90 with a daily low at 105.46 today.
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