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Daily Market Outlook

Wed, Oct 8 2008, 00:35 GMT
by AceTrader Team

AceTrader

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Market Review -    07/10/2008 21:26 GMT

The greenback falls on Bernanke rate cut signal


The U.S. dollar fell on Tuesday as steps by the Federal Reserve to calm chaotic financial markets and a signal by Chairman Ben Bernanke that the central bank was ready to cut rates eroded some of its safe-haven bid. The ICE Futures U.S. dollar index, which tracks the greenback against a basket of six currencies, was last down 0.66 percent to 81.134. It had touched a 13-month high of 81.745 on Monday.  
  
Moves by the Fed to create a facility to buy commercial paper caused investors to sell the yen in favour of some European currencies that had been hammered on worries about the health of the global economy and lack of a coordinated response to the financial crisis from Europe.   
  
In remarks to the National Association for Business Economics, Bernanke opened the door to further monetary easing, highlighting the fact that recent economic data and financial developments showed the outlook for growth has worsened.  
  
The euro rose to as high as 1.3743 versus the dollar, rebounding from a 13-month trough of 1.3444 hit on Monday after escalating worries about the health of European banks. In late New York trade, the single currency was up 0.8 percent at 1.3590. Against the yen, the euro eased from a session high of 141.08 yen but was still up 0.8 percent to 137.94 yen in late New York session.  
  
The dollar dropped to as low as 101.01 against the Japanese yen and was last traded down 0.4 percent to 101.40 yen as U.S. stocks plunged in their fifth straight declining session as fears mounted that the rapidly spreading credit crisis would drag the economy into a deep recession. The Dow Jones industrial average fell 508 points or 5.11 percent, to 9,447. It has lost more than 1,400 points over the past five sessions, nearly 13 percent of its value.  
  
Concerns about the U.S. economy were also highlighted in minutes from the Fed's Sept. 16 policy meeting, which showed participants saw intensified financial strains weighing on growth. Some participants said ‘policy response’ might be necessary if financial strains hurt growth.   
  
Earlier in the day, the Reserve Bank of Australia stunned the market with a 100-basis point rate reduction, stoking speculation that other central banks would follow suit in a coordinated move to combat the global credit crisis. That move resulted in the Australian dollar getting hammered against its U.S. counterpart. The Aussie was last down 2 percent at 0.7058, while the New Zealand dollar tumbled 1.4 percent to 0.6240.  
  
On Wednesday, economic data releases include U.K. Nationwide consumer confidence, Australia Wespac consumer confidence, Japan BoJ report and economic watch DI, eurozone GDP data, German Industrial production, Canada housing starts, and U.S. Pending home sales. 

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Published on  Wed, Oct 8 2008, 01:17 GMT