Fed cuts US interest rate to 3.5 percent

Story link: Fed cuts US interest rate to 3.5 percent

The US dollar saw its biggest one-day decline versus the euro in two months on the announcement that the US Federal Reserve had taken emergency action to cut interest rates ahead of its scheduled meeting on 29 - 30 January.

The Fed, in an 8 to 1 vote, cut its benchmark interest rate by three-quarters of a percentage point to 3.5 percent.

It was the first time the Fed has cut rates between regular meetings since September 2001.

Some analysts expect the Fed to issue another rate cut at its regular meeting, and that the US interest rate could be down to 3 percent by the end of the first quarter.

In addition to the cut to the benchmark rate, the Fed also reduced the discount rate by three-quarters of a percentage point to 4 percent.

The dollar dropped to $1.4615 to the euro by just before 2 p.m. in New York, while it traded at $1.9612 to the pound at the same time.

The greenback did manage to gain versus the yen, to ¥106.7650 to the dollar, but the Swiss franc gained the most versus the dollar in a week to SFr1.0990 to the dollar.