Market News

In late morning trading on Friday in Sydney, the U.S. Dollar traded slightly weaker versus major currencies because traders are now convinced that the Federal Reserve will not raise interest rates to curb inflation. The U.S. currency came under pressure on continued concerns about the future of the U.S. economy, and the possibility that the European Central Bank will not cut interest rates any time soon.

Today the U.S. Dollar traded firmer versus major currencies, adding to gains made overnight on growing speculation that the interest rate cutting cycle by the Federal Reserve Bank may be coming to an end.

The European Commercial Bank will be meeting tomorrow, May 8, 2008 to decide on the interest rate level in the Euro zone, and as a result, the U.S. Dollar traded in a very narrow range against the Yen and the Euro in mid-day trading today in Asia.

Investors are still skeptical about the recovery of the U.S. economy and as a result, the U.S. Dollar traded slightly weaker against major currencies on Tuesday in Singapore. High oil prices elevated commodity currencies including the Canadian dollar. Despite better than expected results of the ISM Survey, covering U.S. services which jumped from 49.6 in March to 52.0 in April, the U.S. Dollar dipped.

The U.S. Dollar traded narrowly against major currencies in early Monday morning trading in Sydney. Financial markets in Japan were closed today due to a public holiday. On May 5, 2008 at 00:45 GMT, the U.S. Dollar traded at 105.40 Yen, compared to 105.39 Yen, while the Euro traded at $1.5447 compared to $1.5424 in late Friday trading in New York.

The U.S. Dollar remained steady against major currencies following a 5-week high versus the Euro overnight, on speculation that the Federal Reserve will end its rate cuts soon.

Starting today, the Federal Reserve will have a two day policy meeting during which a decision will be made regarding the direction of interest rates, i.e. whether or not to cut them. Some investors anticipate that the Federal Reserve will reduce interest rates by 25 basis points.

The U.S. Labor Department data released on Thursday, April 24, 2008 showed that unemployment benefit claims for last week dropped by 33,000 to 342,000, better than the increase of 3,000 which was expected by most economists. This data, coupled with expectations that the U.S. Federal Reserve may soon be ending their rate cutting cycle, helped the U.S. Dollar to hover around close ranges against major currencies on Friday morning in trading in Tokyo.

Following speculation that the U.S. Federal Reserve may not cut interest rates further, the U.S. dollar surged against the Yen and the Euro in Thursday’s afternoon trading in Asia. However many traders expect the Fed to cut interest rates by as little as 25 basis points next week and will attempt to keep interest rates steady going forward in order to curb inflation.

On Wednesday, investors in Asia appeared to be anxiously waiting for next weeks’ meeting of the FOMC, and as a result there was little change in the U.S. Dollar in afternoon trading. On April 30, 2008, the federal policy makers will meet to discuss interest rates. Analysts are already predicting that during this meeting the Federal Reserve will cut interest rates by at least 25 basis points.

Since inflation in the Euro zone continue to rise, it appears that the ECB (European Central Bank) will not cut interest rates any time soon, and as a result, the U.S. Dollar almost fell to a record low against the Euro in mid-day trading in Hong Kong on April 22, 2008. In March, Euro zone inflation rose by 3.5%, the fastest jump since 1992 and higher than the 2% target set by the ECB.

Following Wall Street’s rally last Friday, April 18, 2008 and the hopes that the liquidity crisis may be over, the U.S. Dollar traded firmly against major currencies in early trading on Monday in Sydney. On April 21, 2008 at 10:10 am (00:10 GMT) the U.S. Dollar traded at 103.88 Yen, compared to 103.67 Yen, while the Euro traded at $1.5808 compared to $1.5818 in late trading on Friday in New York.

As predicted by analysts, the Euro surged against the U.S. Dollar because of lack of a concerted effort by the G7 to halt deprecation of the U.S. Dollar against major currencies. In addition, investors believe that poor economic conditions in the U.S. coupled with the liquidity crisis will necessitate the Federal Reserve to cut interest rates from the current level of 2.25%.

Investors are speculating that the U.S. Federal Reserve will cut interest rates soon, and as a result, the U.S. Dollar dropped against the Yen and the Euro during afternoon trading in Asia on Wednesday. Analysts believe that the Federal Reserve Bank will cut key the interest rate by almost 50 basis points during their meeting later this month, to spur an economy that is likely to slide into recession by the middle of this year.

During the G7 meeting in Washington yesterday investors were under the impression that group will intervene in the foreign exchange market to stabilize the U.S. Dollar. However, shortly after the meeting it became clear on Monday, April 14, 2008 that no concerted effort would be taken by the G7 to prop up the U.S. Dollar, and as a result investors moved out of the Dollar and into other currencies.