Forex - US dollar mixed after falling to fresh record lows ahead of Fed decision

Forex - US dollar mixed after falling to fresh record lows ahead of Fed decision

	Published : Wed, 31 Oct 2007 00:39 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar was mixed against major currencies in midmorning trade Wednesday after tumbling to fresh record lows overnight as dismal housing and consumer confidence data strengthened expectations that the Federal Reserve will cut interest rates.

After the Fed's half-point reduction in September, most investors expect the central bank to announce a quarter-point cut at the conclusion of its two-day meeting Wednesday.

Nervous traders sent the greenback skidding to a new all-time low against the euro and a 26-year low against the sterling after consumer confidence fell to 95.6 in October, the lowest level in two years. That was below the consensus estimate of 99.5 and down from a revised reading of

99.5 in September.

In addition, house prices fell across America in August for the eighth month in a row, according to the S&P/Case-Shiller index.

''These data reinforced expectations for the Fed to cut interest rates by 25 basis points to 4.5 percent, with traders pricing a 97 percent chance of such a move, weighing on the greenback,'' said John Kyriakopoulos, head of currency strategy at Thomson IFR.

At 10.20 am (2320 GMT), one US dollar was buying 114.71 yen compared with 114.65 yen in late New York trade.

The euro was up at 1.4436 dollars from 1.4435 dollars after racing to an all-time high of 1.4441 dollars on the back of the disappointing economic data.

The sterling was buying 2.0681 dollars in midmorning trade after soaring to 2.0695 dollars overnight, the highest level since 1981 when Margaret Thatcher was prime minister.

The greenback did manage to win some friends, albeit briefly, in late Asian and European trading on Tuesday after a Wall Street Journal article indicated a Federal Reserve rate cut on Wednesday was not a done deal.

The release of disappointing consumer confidence and housing data triggered a sharp reversal in those gains.

''There is a theory coming from the US bond market that the ... article was an attempt by certain Fed members to stem the US dollar's heavy momentum lower. That is one of the reasons the bond market showed no reaction to the article. It appears by the forex closing levels the forex market didn't buy it either,'' said John Noonan, an analyst at Thomson IFR.

Sydney at 10.20 am (2320 GMT)

US dollar

114.71 yen

1.1589 sfr

Euro

1.4436 usd

165.605 yen

1.673 sfr

0.6984 stg

Sterling

2.0681 usd

237.246 yen

2.39662 sfr

Australian dollar

0.9197 usd

0.4446 stg

105.53 yen

New Zealand dollar

0.7653 usd

allison.jackson@thomson.com

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