Friday January 25, 2008 - 21:04:47 GMT
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Reuters - www.reuters.com
FOREX NEWS-Fading chances of deeper Fed rate cut lift dollar
(Adds comments, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, Jan 25 (Reuters) - The dollar rose on Friday as
investors scaled back bets for another aggressive Federal
Reserve interest rate cut next week and on optimism a $150
billion stimulus package would help support the U.S. economy.
However, concerns about an extended fall in U.S. equities
helped push the Japanese currency up against the greenback.
U.S. stocks extended losses early in the afternoon and
safe-haven Treasury bond prices rose, reflecting considerable
uncertainty about the near-term outlook.
The Fed's emergency three-quarter-percentage-point rate cut
on Tuesday, precipitated by sharp falls in global stocks,
prompted investors to price in a half-point reduction from the
U.S. central bank at next week's scheduled policy meeting.
Losses in European stock markets on Friday are now being
largely linked to fallout from a trader scandal at the French
bank Societe Generale (SOGN.PA: Quote, Profile, Research) which Fed policy-makers were
apparently unaware of.
Rate futures suggested a 64 perceived chance of a 50
basis-point reduction in the fed funds rate target to 3 percent
at the upcoming two-day Fed meeting. This was down from a 76
percent probability seen on Thursday.
"We are seeing some consolidation on the dollar versus the
euro and some other major currencies," said Matthew Strauss, a
currency strategist at RBC Capital in Toronto. "There's still a
lot of volatility in the markets, but there's no panic."
The euro dropped to a session low of $1.4661 <EUR=>,
according to Reuters data. It was last trading at $1.4672, down
0.6 percent on the day. Some traders cited profit-taking ahead
of the weekend.
The dollar slid to an intraday low of 106.80 yen <JPY=>,
tracking the slide in equities. It was last trading relatively
unchanged on the day at 106.90 yen.
(Additional reporting by Lucia Mutikani; Editing by James
journalists are subject to the Reuters Editorial Handbook which
requires fair presentation and disclosure of relevant interes
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