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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Paul Kern who wrote (85256)	8/17/2007 10:12:46 AM
From: Paul Kern	Respond to of 110194

Dollar Falls Versus Euro After Unexpected Fed Discount Rate Cut By Min Zeng Aug. 17 (Bloomberg) -- The dollar fell versus the euro and pound after the Federal Reserve reduced its discount lending rate to prevent credit market losses from slowing the economy. The dollar declined against 14 of 16 major currencies as a reduction in borrowing costs dims the allure of U.S. assets. The decline today trimmed the dollar's weekly advance as investors had sought safety in the currency after a global rout of credit markets. ``The Fed has taken the first step to calm down the market and restore investors' confidence,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``The dollar is getting a double-whammy. A reduction in interest rates makes it less attractive. And the safe-haven flow into the dollar also flooded out.'' The dollar fell 0.5 percent to $1.3493 per euro at 10:03 a.m. in New York, from $1.3426 yesterday. The U.S. currency also declined 0.2 percent to $1.9876 per pound. The yen gained 0.1 percent to 113.75 per dollar and fell 0.4 percent to 153.43 per euro. ``The Fed is bringing back stability in the market,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The Fed's move will also encourage people to get back to the carry trade.'' The Fed cut the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent from 6.25 percent. The central bank, in an unscheduled announcement, said it's prepared to take further actions to ``mitigate'' damage to the economy from the rout in global credit markets. ``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward,'' the central bank's Federal Open Market Committee said in a statement released in Washington. ``The downside risks have increased appreciably.'' The dollar extended its loss versus the euro after the Reuters/University of Michigan's preliminary index of consumer sentiment declined to 83.3, from a final reading of 90.4 for July. The median forecast in a Bloomberg News survey of economists was for a gauge of 88. To contact the reporter on this story: Min Zeng in New York at mzeng2@bloomberg.net Last Updated: August 17, 2007 10:05 EDT