Wednesday October 8, 2008 - 20:59:50 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen rallies as rate cuts fail to boost markets
* Yen soars on fear central banks easing is not sufficient
* Fed leads global coordinated rate cut, eases by 50 bps
* U.S. dollar falls against basket of currencies
(Adds comments, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, Oct 8 (Reuters) - The yen rallied broadly on
Wednesday, hitting its highest level in three years against the
euro, on fears coordinated central bank rate cuts may not be
sufficient to thaw the frozen credit markets.
Initial euphoria over the half percentage point rate cuts
by the banks quickly fizzled. U.S. stocks seesawed in volatile
trading and credit markets remained effectively gridlocked.
High-yielding currencies such as the Australian and New Zealand
dollars tumbled as risk aversion remained high.
"It's essentially too little, too late. Liquidity is still
at a premium right now and that's weighing on the market's risk
appetite," said Kathy Lien, director of currency research at
GFT Forex in New York.
"Unfortunately, they should have taken this action before
the Reserve Bank of Australia cut interest rates a full
percentage point earlier in the week, but the RBA has
essentially raised the bar," she added.
In late afternoon trading in New York, the dollar traded
down 1.5 percent at 99.810 yen <JPY=>. The euro fell against
the yen 0.8 percent to 136.59 yen <EURJPY=>, after falling as
low as 134.20 yen, the lowest level since August 2005,
according to Reuters data.
The U.S. dollar remained weaker against a basket of six
currencies, but had come off lows hit earlier in the session
following the global easing announcement, which some analysts
said curbed the recent safe-haven bid for the greenback.
The ICE Futures U.S. dollar index, which tracks the
greenback against a basket of six currencies, was last off 0.3
percent at 80.893 .DXY, after hitting a low of 80.399.
The euro last traded up 0.5 percent at $1.3682 <EUR=>.
"The dollar can remain underpinned by the notion that
interest rates abroad are likely to fall at a faster pace than
they are here," said Omer Esiner, senior FX analyst at Ruesch
International in Washington. "The euro can get some more near
term support support from the idea that officials there are
trying to get ahead of the curve."
High-yielding commodity currencies tumbled, with the
Australian and New Zealand dollars falling to five-year lows
earlier at US$0.6439 <AUD=> and US$0.5791 <NZD=>,
Against the yen, the Aussie dollar lost about 5 percent to
67.63 <AUDJPY=R> and the kiwi fell 3.7 percent to 61.16
VOLATILITY TO PERSIST
In an attempt to stem the worst financial crisis since the
1930s, central banks around the world cut interest rates by a
half-percentage point on Wednesday in the first coordinated
move since the Sept. 11, 2001, attacks. For more, see
That cut lowered the Fed's benchmark overnight lending rate
to 1.5 percent and took its discount rate to 1.75 percent. The
European Central Bank cut rates to 3.75 percent, while the Bank
of England took its rate to 4.5 percent.
The coordinated move followed steep losses in world equity
markets. Overnight, the Nikkei average plunged 9.4 percent, its
biggest drop since the 1987 stock market crash. For more, see
Financial markets are expecting the Fed and other major
central banks to further lower interest rates and inject
liquidity, analysts said.
"Everybody is looking to the U.S. and Europe to provide
cues that this crisis is being contained," said Aviral Rai,
senior managing director at Pali Capital in New York. "But the
truth is no one can really see the bottom of this problem and
this lack of global confidence has been fueling a sell-off."
(Additional reporting by Wanfeng Zhou in New York; Editing by
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