Forex - US dollar mixed after falling to record lows overnight on Fed rate cut

Forex - US dollar mixed after falling to record lows overnight on Fed rate cut

	Published : Thu, 01 Nov 2007 00:03 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar was mixed against major currencies in midmorning trade Thursday after nose-diving to fresh record lows overnight in response to the Federal Reserve's decision to cut interest rates for the second time in as many months.

The greenback skidded to a new all-time low against the euro, fresh 23-year lows against the Australian dollar and the lowest level against the Canadian dollar since 1957 as the interest rate cut overshadowed the release of better-than-expected economic data.

The yen was one of the few currencies which weakened against the dollar as investors sold the low-yielding currency to buy higher yielding assets.

'The US dollar fell hard by the close of the day despite the fact that US data was better than expected and US yields closed significantly higher in the wake of the Federal Open Market Committee statement that was crafted to dampen expectations of future rate cuts,' said John Noonan, an analyst at Thomson IFR.

'The foreign exchange and stock markets have a view that the Fed will probably move rates lower again despite the rhetoric.'

At 9.50 am (2250 GMT), one US dollar was buying 115.275 yen compared with 115.45 in late New York trade.

The euro was slightly lower at 1.4472 US dollars from 1.4485 US dollars overnight after punching above 1.4500 US dollars to hit a record high of 1.4508 - its fourth new high in as many trading days.

The greenback dived to 94.19 Canadian cents, breaking the former 1957 low of 94.22 Canadian cents, before settling at 94.35 Canadian cents.

'The huge rally in the Canadian dollar is certainly supportive of the view that it is possible for the Aussie dollar to hit parity at some stage,' Noonan said.

The Australian dollar marched to 93.40 US cents overnight, the highest level since the currency was floated in 1984, before settling at 93.30 US cents.

'The backdrop for the Australian dollar is very supportive indeed and our medium-term target of 96 US cents is in sight,' said John Kyriakopoulos, head of currency strategy at National Australia Bank.

The Fed decision overshadowed a 3.9 percent year-on-year rise in third quarter GDP, which was way above expectations for a 3.0 percent increase. The ADP national employment report also showed 106,000 news private sector jobs were created in October, supporting the argument for a soft landing in the US rather than a recession, Kyriakopoulos said.

The employment data also raised expectations for the key non-farm payrolls report on Friday.

Sydney at 9.50 am (2250 GMT)

US dollar

115.275 yen

1.1587 sfr

Euro

1.4472 usd

166.84 yen

1.677 sfr

0.6957 stg

Sterling

2.0806 usd

239.874 yen

2.41081 sfr

Australian dollar

0.9319 usd

0.4479 stg

107.42 yen

New Zealand dollar

0.773 usd

allison.jackson@thomson.com

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