US dollar stronger after Fed raises interest rates again

Story link: US dollar stronger after Fed raises interest rates again

The US dollar was stronger Tuesday after the US Federal Reserve did as most analysts expected it would and raised interest rates by 25 basis points to 3.75 percent. It was the eleventh meeting in a row that the Fed had raised interest rates.

The statement from the Federal Open Market Committee that accompanied the announcement indicated that hikes in the rates would continue. It said that rates could continue to be raised at a “measured pace”, that the US economy would only be set back in the “near term” by the effects of Hurricane Katrina, and that rising energy prices could push inflation higher.

After the Fed announced its decision on interest rates, the US dollar was trading at $1.2130 in relation to the euro, at $1.8000 versus sterling, at ¥111.89 against the yen, and at SFr1.2808 in relation to the Swiss franc.

The euro was up 0.1 percent to £0.6749 against sterling, and before the Fed’s interest rate decision was announced, it had been up 0.3 percent versus the US dollar.

The ZEW survey of economic sentiment was dow more than had been expected in Germany, which was blamed on the uncertainty about the outcome of last Sunday’s elections there. However, pressure to sell the euro looked to be easing up as there began to be some optimism that the main German political parties might be able to reach an accord without too much argument.