fundamental alert

Forex Market Update: U.S. Dollar Holds Ground Despite Rate Cut Speculation

Friday, 03 October 2008 05:30:16 GMT  |  DailyFX Research

The dollar gains continued into early Asia, with the EURUSD falling back to 1.3772, but holding above Thursday’s lows, before position-squaring ahead of the key U.S. jobs data and the U.S. House of Representatives vote on the bail out package, resulted in the USD paring gains across the board. The only exception was USDJPY which traded in inverse, falling to session lows of 104.86 as the USD held gains again AUD and EUR, with USDJPY rising to Asian highs of 105.40 while the buck lost ground against the EUR and AUD. Fed officials Bullard and Hoenig spoke over the session, both downplaying the need for rate cuts with Hoenig citing current levels as simulative and Bullard dismissing a rate cut as the right response to the current crisis. However, their views may have been trumped by the release of a N.Y. Times article for Friday's edition, stating that Fed officials were considering a rate cut on lower growth expectations. U.S. 2year yields held at low levels between 1.60-1.65% though US overnight cash rates managed to ease to 13%, down from highs around 4.5% yesterday with the BOJ and RBA adding liquidity. Foreign banks in Japan continue to pay a premium. Oil prices continued to decline, dropping a USD, though gold bounced as the USD weakened this session. Asian stocks were all weaker on the session, in the wake of the fall on Wall Street.

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