Dollar Gains on Speculation Fed's Actions Will Revive Growth


The dollar rose against the yen and the euro on speculation the Federal Reserve's interest-rate cuts and efforts to spur lending will help revive economic growth.

The U.S. currency also advanced versus the Swiss franc and Canadian dollar, extending gains since the Fed's March 18 move to cut its benchmark rate 0.75 percentage point to 2.25 percent and decision last week to allow more financial firms to borrow federal money. The dollar also rose after some analysts said the Group of Seven nations may take coordinated action in currency markets to counter the impact of a slowing U.S. economy.

The dollar climbed to $1.5341 per euro, the highest since March 12, before trading at $1.5390 as of 5:35 p.m. in Tokyo, from $1.5431 in New York on March 21, when it posted its first weekly advance against the euro in more than a month. It also advanced to 100.04 yen from 99.58. Japan's currency traded at 153.96 per euro from 153.55.

The U.S. Dollar Index traded on ICE Futures in New York, which tracks the value of the currency against six major counterparts including the euro and yen, rose 0.5 percent to 73.058. The dollar climbed 0.8 percent versus the Swiss franc to 1.0171, 0.4 percent against the Norwegian krone to 5.2813 and 0.6 percent against Canada's dollar to 1.0292.

The Fed on March 20 expanded collateral eligible for its auction of Treasuries to include bundled mortgage debt and securities linked to commercial-property loans. The Fed announced on March 11 a program to swap $200 billion in Treasuries for debt including mortgage-backed securities.

The dollar also advanced as people who trade currencies say confidence in the markets to determine exchange rates is falling.


TradingEconomics.com, Bloomberg
3/24/2008 6:39:15 AM