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The Dollar Gained On Economic Recovery Expectation
By: Finotec - 20-09-2007
0votesThe dollar rose from a 15-year low against a basket of currencies on Wednesday as investors bet the Federal Reserve's interest rate cut on Tuesday will help boost a slowing U.S. economy. The Fed slashed the fed funds rate to 4.75 percent from 5.2
The Fed move also helped to renew risk appetite in some investors who returned to the carry trade in which investors borrow in a low-yielding currency to buy higher-yielding assets elsewhere. The move was exacerbated by gains in U.S. stocks. All
three major U.S. stock indexes were on track for a second day of gains on Wednesday. "There is moderate reentry into carry trades with the yen as the cheap vehicle to purchase U.S. equities," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington.The US Dollar traded around the levels of 1.3963 against the Euro, 116.10 Vs. the yen and 2.0020 Vs. the Sterling.
Traders and analysts, however, said the dollar is expected to weaken in the long-term, once investors again look at rate differentials. "Another rate cut by the Fed is now expected before year end, as further narrowing of the interest rate differential
between Europe and the U.S. should keep the dollar under pressure in the near term," said Nick Bennenbroek, head currency strategist at Wells Fargo Bank in New York.Analysts said risk aversion was lower on Wednesday, but investors would likely stay cautious on worries about more bad news tied to the U.S. sub prime mortgage crisis and resulting credit market troubles, highlighted by the problems of British mortgage lender Northern Rock.
Next Analysis: The Dollar to Record Lows Vs the EuroContent Provided by:
Finotec
Derivative and forex trading broker Finotec is a division of leading real-time Internet trading company Finotec Trading Inc, which pioneered the world of online forex trading in 1998. After launching our revolutionary forex online trading platform in 2001, we continued to improve our services and no
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