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FX round-up: Dollar shines after Fed announcement

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Date: Wednesday 12 Mar 2008

LONDON (ShareCast) - The Federal Reserve came to the rescue of the dollar Tuesday as its $200bn liquidity injection raised hopes that the US economy might avoid sliding into a recession.

The co-ordinated move by central banks to ease credit constipation in the banking system may mean that the Fed does not have to cut interest rates by as much as previously thought when the Federal Open Market Committee next meets on March 18.

The euro saw its value trimmed to $1.5326 in New York, having traded as high as $1.5474 earlier in the day in London trading, while the US currency also improved against the yen to 103.46 from 102.09 in London trading. The euro’s value had been bolstered by news that the ZEW economic sentiment indicator jumped in March.

The research institute's economic expectations index for Germany rose to a better than expected -32.0 points in March from -39.5 points in February.

The dollar received a small boost from news that America’s trade deficit grew to $58.2bn in January from a revised $57.9bn the month before, which was better than the rise to $59bn analysts had expected.

In London, sterling held its own against the euro but lost ground to the dollar. The UK currency moved ahead briskly against the yen and the Swiss franc, however, following the news of the concerted central bank intervention.

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