The U.S. Dollar Weakens – the Morning After

On Tuesday, March 18 2008, the U.S. Dollar strengthened against major currencies after the new of better than expected quality results from two large U.S. investment banking firms, Goldman Sachs and Lehman Brothers and the 75 basis points Federal Fund interest rate cut, from 3.00 to 2.25, by the Federal Reserve Bank. These results helped to ease investors’ concerns about the liquidity crisis, as investors had speculated that Lehman Brothers is a potential victim of the liquidity crunch.
Consequently, investors’ confidence surged and stocks rallied on Wall Street. The U.S. Dollar surged to 100.43 yen and the Euro dipped to $1.5611. However, the rally was not sustained, as Japanese exporters sold the U.S. currency in early trading on Wednesday March 19, 2008 at 00:54 GMT. In the Tokyo exchange, the U.S. dollar fell against both the yen and the Euro, and traded at 99.63 yen and $1.5668, respectively.
The uncertainty surrounding the liquidity crisis and concerns about the U.S. economy will continue to put extreme pressure on the U.S. dollar. Investors believe that the Euro will continue to strengthen against the U.S. dollar.