WHy did dollar gain after fed cuts?

Z

z106

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Teh dollar had its single biggest daily increase since 1999 today after the fed cuts.

I thought that fed cuts were supposed to result in the dollar dropping?

Now - I know that the markets were hoping for a full percentage drop but only got .75%.

So i appreciate that it had to a large extent factored in teh 1% drop already.

But to get the biggest single day bounce since the 90's due to not getting the extra .25%?
That has to be surprising in any mans book surely.
 
A few possible reasons;

- Buy the rumour sell the fact
- the stock market reaction gave the usd some support ie are we out of the woods ?
- the market got too far ahead of itself
- profit taking as it has come a long way

I would say it was a combination of all the above but it hasnt really lasted as its now back trading towards 1.58..

This usd will stay weak with us rates this low. There is talk that the usd is the new carry currency replacing the chf and jpy. This combined with the credit crisis and the stock market turbulance in the us will weigh on the usd.

The only hope for th usd in the short term is concerted intervention with the few ecb and japs or ecb rate cuts. Neither are realistic at present.
 
Its perception that the aggressive Fed action will save the US economy and as a result the $, while the ECB which is slower to cut will induce economic quagmire in Euroland.

Giggidy Giggidy.
 
Is the dollar set to weaken futher over the next few months or would a posible drop in euro int rates help the recovery of the dollar.
 
The trend is for the dollar to continue weaken across the board. It has come a long way against the euro so we maybe will see some retracements (today) however in general any rally in the usd should be sold in particualr against other currencies such as gbp aud and jpy. "the trend is your friend" !! An ecb cut would only help the usd against the euro but that does not look likely at this stage.

Hope this helps
 
i think there will be an ecb rate cut, but it will come totally unexpected, ireland, spain and italy cannot cope with the euro being so high on international markets, but i think the ecb will wait longer than anyone expects in order to ensure that the property and financial bubble is truly killed off and will not reflate, if they dont cut they run the risk of a banking collapse in one of these countries and a forced exit from the euro, the euro is not a robust currency and the markets will soon realise this
 
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