LONDON, March 18: The dollar wobbled close to record low points against the euro on Tuesday as traders eagerly awaited an interest rate decision from the US Federal Reserve, analysts said.
The Federal Reserve was widely expected to slash its key lending rate to try to ease turmoil on Wall Street and ward off the threat of a prolonged recession in the world’s largest economy.
In European foreign exchange trading, the euro advanced to $1.5789, up from $1.5725 late on Monday, when it had struck a record high value of $1.5905.
Against the Japanese currency, the dollar firmed to 98.41 yen, compared with 97.32 on Monday, when it had reached 95.75 yen which was last seen in 1995.
Investors were anticipating a bold move by the Fed to try to ease strains on the US financial system.
“There are wide views of what the Fed will do, with estimates ranging from a 50 to 125 basis point rate cut,” said David Mann, currency strategist at Standard Chartered Bank.
“The dollar is still under a lot of negative pressure. The credit crisis is a US problem. It’s hard to see what the Fed can do that is dollar positive,” he said.
The meeting follows an emergency cut by the Fed to one of its other rates on Sunday after Wall Street giant Bear Stearns fell victim to the credit crunch.
The Federal Open Market Committee (FOMC) has already slashed its key federal funds interest rate by 2.25 percentage points to 3.00 per cent since September to try to bolster the economy in the face of a US housing slump and related credit crunch.
It also lent billions of dollars to financial institutions in exchange for debt, such as troubled mortgage-backed securities.
Investors fear that the Fed may be running out of ammunition to ease gridlock in US credit markets. Some analysts said that even a bold rate cut by the Fed later on Tuesday would not be enough to prop up ailing markets.—AFP
