Dollar Drops in Afternoon Trading in Asia

Investors are speculating that the U.S. Federal Reserve will cut interest rates soon, and as a result, the U.S. Dollar dropped against the Yen and the Euro during afternoon trading in Asia on Wednesday.  Analysts believe that the Federal Reserve Bank will cut key the interest rate by almost 50 basis points during their meeting later this month, to spur an economy that is likely to slide into recession by the middle of this year.

 

Since the European Central Bank intends not to cut interest rates in order to curb inflation in the Euro Zone, the U.S. dollar will continue to be less attractive compared to the Euro.  On April 15, 2008, at 1:00 pm (05:00 in Sydney) the U.S. Dollar traded at 101.65 Yen compared to 101.79 Yen; the Euro traded at $1.5799 compared to $1.5783.  Analysts are predicting that the U.S. inflation rate will rise by 0.4% in March, as a result of increased oil and food prices.  Official inflation results will be announced today.

 

In an attempt to ease the liquidity crisis the Federal Reserve has reduced interest rates by a total of 300 basis points compared to the European Central Bank, which has kept interest rates steady since June.