The key here is the US$ index which is heavily weighted to the DM.
Dollar ends U.S. mixed after Fed cuts
rates
NEW YORK, Sept 29 (Reuters) - The dollar trimmed overnight losses
against the yen but slipped against the mark after the Federal Reserve
lowered interest rates by a quarter percentage points, as widely expected,
dealers said.
''All in all it met expectations so the market is a little confused as to what
to do next,'' said John McCarthy, senior vice president at ING Barings Capital Markets.
Ending weeks of speculation, the Fed reduced the target for the fed funds rate charged for overnight lending between
banks by one quarter percentage point to 5.25 percent. It was the first interest rate cut since January 1996.
The dollar slipped against the mark, feeling pressure as U.S. stocks turned lower on disappointment that the easing
was less than the 50 basis points some expected and did not include the 5.0 percent discount rate.
''I think the foreign exchange markets will trade more on flows of capital than interest rates, meaning that if capital
markets get hit here as a result of this the dollar will trade down,,'' said John Nelson, forex manager at ABN-AMRO
Bank.
The dollar slid against the yen overnight, hurt by reports that the world's big economies were looking at ways to aid
the Japanese unit and last-minute wagering before the Fed move.
It ended at 134.52/62 yen up from 134.22/32 at the open but well below Monday's 136.00/05 close. It slipped to
1.6730/35 marks from 1.6740/50. The Dow Jones industrials ended down 28.32 at 8080.52 after paring a late 93
point decline.
The dollar had priced in the easing after recent suggestions by Fed chairman Alan Greenspan that global market
turmoil since August had become a greater risk to the U.S. economy than inflation.
The near collapse of a highly-respected hedge fund and profit worries at major financial firms all but ensured some
sort attempt at confidence building by the Fed.
(Note: this article is ''in progress''; there will likely be an update soon.)
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