The Dollar fell on Wednesday on speculation that the Federal Reserve may cut interest rates again this year to prevent a weak housing sector from damaging the broader economy. Comments by former Fed Chairman Alan Greenspan on Wednesday and by San Francisco Fed President Yellen late on Tuesday highlighted concerns about the economy, adding to fears that signs of slower growth would lead to lower rates. The Dollar has been undermined by the prospect of further rate cuts, and the currency has been unable to capitalize on last week's solid jobs report and rising bond yields, remaining near an all-time low against the Euro.
Although minutes from the Fed's September meeting released on Tuesday revealed little inclination by the central bank to cut again this month, December rate futures shows 76% chance of a 25 basis point rate cut that month. Possibility for another quarter point cut in October stand at only 34% percent, compared with 64% before Friday's stronger-than-expected September payrolls report.
At yesterday close, EurUsd traded at 1.4139 up 0.23% on the day. It hit a record high of 1.4280 last week. Sterling ended unchanged at 2.0391, after having hit an intraday 2.0477 high. Bank of England Governor Mervyn King said he would monitor inflation closely, raising the bar for a UK rate cut.
Greenspan said the credit squeeze that has rattled financial markets will take its toll eventually on the US economy, adding to falling home prices and forcing consumers to cut back spending. Signs of continued growth outside the United States helped support some investor risk appetite.
The Bank of Japan is expected to end a two-day policy meeting on Thursday by keeping interest rates at 0.5%. That also weighed on the Yen, often borrowed cheaply to finance purchases of higher-yield assets.
The UsdJpy was unchanged at 117.23, while the EurJpy rose 0.15% to 165.60. Earlier, the EurJpy climbed to a two-and-a-half-month high 166.25. EurChf jump 0.3% to 1.6747, a 10-year high.