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FX round-up: Dollar drops after Fed cut

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Date: Thursday 01 May 2008

LONDON (ShareCast) - The dollar fell against the euro and yen, despite earlier gains, after the Federal Reserve cut interest rates to 2%.

The move was widely expected and in its accompanying statement the central bank signalled that rates may be kept on hold in the short term amid inflationary pressures.

The decision to cut rates again comes after more weak economic data, such as a recent GDP report from the Commerce department that showed an annual rate of just 0.6%.

The euro remained under pressure on Wednesday as traders continue to digest recently disappointing economic data.

Sterling rose against the euro and the dollar despite more gloomy data about the UK housing market.

House prices fell on an annual basis for the first time in 12 years in April as prospective buyers found it increasingly difficult to finance property purchases, said Nationwide, the UK’s largest building society.

Analysts said risk appetite boosted the pound while overall sentiment is up on confidence the worst of the credit market crunch is now over.

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