USD drops on fear rate cuts not enough

Story link: USD drops on fear rate cuts not enough

The US dollar was lower versus the euro, the yen and the Swiss franc on Wednesday after seeing gains on Tuesday after the US Federal Reserve cut interest rates by three-quarters of a percentage point to 2.25 percent.

The day’s declines came on concerns that the Fed’s accumulated rate cuts over the past few months will not be sufficient to rescue credit markets and the wider US economy.

In addition, the dollar’s declines versus the euro were partly based on the possibility that some US and European banks will have to take more writedowns related to the subprime mortgage crisis.

At nearly noon in New York, the US dollar traded at $1.5653 to the euro while it took ¥99.2850 or SFr1.001 to buy a US dollar.

Earlier, the franc was at SFr0.9943 to the greenback.

The pound was weaker versus the euro and the US dollar following the release of the minutes from the latest meeting of the Bank of England’s Monetary Policy Committee, which showed that two of the committee’s nine members voted to cut interest rates rather than to hold rates at 5.25 percent.

Additionally, the pound was hurt by declines for HBOS (LSE: HBOS), despite its insistence that it is not having liquidity problems.

In late morning trade, the pound traded at 78.76p to the euro while it took $1.9876 to buy a pound.

The South African rand was weaker versus all major currencies on worries that losses in the credit markets will hurt demand for high-yield currencies.

Just before noon in New York the rand was trading at R7.9935 to the US dollar while it took ¥12.420 to buy a rand.