Dollar Falls Versus Euro on Joint Rate Cuts by Central Banks


The dollar declined the most against the euro in more than two weeks as global central banks made coordinated reductions in borrowing costs, reducing demand for the U.S. currency as a haven from credit market turmoil.

The euro pared its loss against the yen as an increase in U.S. stocks encouraged investors to buy higher-yielding assets funded by low-cost loans in Japan. The dollar rose to a 14-month high versus the euro on Oct. 6 as the financial crisis spurred a surge in demand for U.S. currency funding in money markets.

The dollar dropped 0.8 percent to $1.3698 per euro at 2:46 p.m. in New York, from $1.3588 yesterday.It touched $1.3444 on Oct. 6, the strongest since August 2007, when the credit market crisis gathered momentum. The euro declined 0.6 percent to 137.13 yen from 137.89 after touching 134.17, the lowest level since August 2005.

Canadian dollar advanced, snapping a four-day losing streak, as global central banks cut interest rates by a half-percentage point. The currency climbed as much as 0.47 percent to C$1.123 per U.S. dollar at 3:55 p.m. in New York, from C$1.1058 yesterday.

Brazil's real, took a pounding early in the session but recovered after the central bank intervened four times to flood the market with dollars. The real closed 0.74 percent stronger at 2.294 per dollar after plunging more than 8 percent to 2.53 in spot electronic trading.

The yen fell 0.2 percent to 44.02 against the Brazilian real and 16.42 versus the Norwegian krone on speculation investors will resume carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's currency earlier gained as much 10.7 percent versus the real and 3.4 percent against the krone. The yen surged against the dollar, breaching 100 per dollar for the first time in six months, after a plunge in global stocks prompted investors to reduce holdings of higher- yielding assets funded in Japan. Japan's currency rose to 100.03 per dollar at 3:45 p.m. in New York, from 101.47 yesterday in New York. It reached 98.61 earlier.

British pound erased early gains to sink to fresh lows on Wednesday, in spite of the UK government’s bank bail-out and a co-ordinated interest rate cut by central banks across the globe. The pound slid 1.67 per cent against the US dollar to $1.731 at 3:50 p.m. in New York, extending Monday’s 2½-year low, while against the euro, sterling retreated 2 per cent to £0.791.

The Australia and New Zealand dollars rebounded against the dollar the from hitting new lows at midday in London. The Australian dollar increases 0.56 percent to 67 U.S. cents, as of 4.:05 p.m. in New York. The currenc also rebounded 0.41% percent to 66.928 yen, after touching 63.75, the lowest since 2002. The New Zealand's dollar gained 0.98 percent to 60.6 U.S. cents after slipping as much as 7.95 percent to 57.92 U.S. cents, the weakest since 2003.

The India's rupee fell as much as 1.9 percent to 48.77 today in Mumbai on speculation a rout in global equities will encourage investors to take more money out of the nation.

The Russian ruble rose for a second day against the dollar after seven central banks around the world cut interest rates in an effort to calm the turmoil in financial markets, reviving sentiment for emerging-market assets. The managed currency rose to as high as 26.0175 per dollar and was at 26.1021 by 7:16 p.m. in Moscow, from 26.1739 yesterday.


TradingEconomics.com, Bloomberg
10/8/2008 1:19:30 PM