USD Falling after FOMC Statement
The U.S. dollar dropped against the euro, pound and yen today after the Federal Reserve left the interest rate unchanged and released a statement showing no substantial signs that the rate can be raised by the end of the year.
As the majority of the market analysts expected, the Federal Open Market Committee left the federal funds rate at 2.00 percent at this meeting. The main question was the statement and the signals for the further rate hikes. The Forex market expected some strong signs that the rate will be increased soon. As the statement failed to meet these expectations, the market reacted with a fast and volatile dollar’s depreciation against the other currencies.
Although the Fed noted that the economic growth is probably going to expand and there are risks of uncertainty regarding the inflation, the statement missed any notions that usually predate the rate hikes. The only positive signal for the dollar bulls was one vote against this decision (Richard W. Fisher preferred to increase the rate):
The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
EUR/USD went up today from 1.5571 to 1.5675 as of 19:45 GMT with a daily high at 1.5587. GBP/USD increased from 1.9709 to 1.9753, while USD/JPY went down 107.81 107.74 even with a falling yen.
August 10th, 2008 at 4:18 pm
The way the USD has been moving high and low over a year now. TheUSD had lost the respect as a stable and reliable currency. With twin deficit growing and next year with a 480 billion dollar deficit and over 9 trillion in debt. The forgein investors will shy away from investing in the USD. The US economy need to live within it means in order for the dollar to gain strength and respect as a major international currency. If the present trend continues the end of the dollar is very soon.