Forex - US dollar mixed vs major currencies after volatile trading overnight

Forex - US dollar mixed vs major currencies after volatile trading overnight

	Published : Thu, 25 Oct 2007 01:19 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar was mixed against major currencies in midmorning trade Thursday after volatile trading on financial markets overnight, as Merrill Lynch's 7.9 billion dollar write-down and a sharp drop in existing home sales re-ignited fears the sub-prime mortgage crisis is far from over.

The greenback sank in tandem with Wall Street as investors hit the sell button before a recovery late in the session on growing speculation the Federal Reserve will cut interest rates by a further 50 basis points next week to keep the economy bubbling along.

'The recovery from the lows on Wall Street today was quite revealing. The market is prepared to shrug off bad news such as the horrible housing data and worrying Merrill write-down as long as there is confidence that the Fed will be aggressive in putting things right again,' said John Noonan, an analyst at Thomson IFR.

At 9.55 am (2355 GMT), 1 dollar was buying 114.055 yen compared with 114.25 yen in late New York trade. The euro was at 1.4265 US dollars, on par with its position in late overnight trading.

Usually rumours of a looming interest rate cut would weigh on the dollar as investors switch to higher-yielding currencies.

This wasn't the case overnight because a rate cut has been expected for a while and the greater risk for the market now is the credit crisis, said Ian Copsey, senior financial analyst at Global Forex Trading in Tokyo.

Elsewhere, the Australian dollar is expected to continue its ascent Thursday after higher-than-expected underlying consumer price inflation released Wednesday increased the likelihood for an interest rate hike next month and early next year.

'We now expect the RBA (Reserve Bank of Australia) will not only hike rates by 25 basis points in November but also look for a further 25 basis points hike to 7 percent in February of 2008,' said John Kyriakopoulos, head of currency strategy at National Australia Bank.

Kyriakopoulos has raised his year-end target for the Australian dollar to 92 US cents from 89 US cents and mid-2008 forecast to 95 US cents from 92 US cents in anticipation of interest rates reaching 7 percent.

Sydney 9.55 am (2355 GMT)

US dollar

114.055 yen

1.1724 sfr

Euro

1.4265 usd

162.655 yen

1.6722 sfr

0.6963 stg

Sterling

2.0488 usd

233.643 yen

2.40172 sfr

Australian dollar

0.9022 usd

0.4403 stg

102.88 yen

New Zealand dollar

0.7541 usd

allison.jackson@thomson.com

bhx/ng

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