U.S. Dollar Falls as Hope of Increase in Interest Rates Wane

In late morning trading on Friday in Sydney, the U.S. Dollar traded slightly weaker versus major currencies because traders are now convinced that the Federal Reserve will not raise interest rates to curb inflation.  The U.S. currency came under pressure on continued concerns about the future of the U.S. economy, and the possibility that the European Central Bank will not cut interest rates any time soon.

On May 8, 2008 at 10:50 am (00:50 GMT) in Sydney, the U.S. Dollar traded at 103.74 Yen compared to 103.75 Yen, while the Euro traded at $1.5401 compared to $1.5394 in late trading in New York.

According to Alan Greenspan, the former Chairman of the Federal Reserve Bank, the growth of the U.S. economy will remain sluggish for some time to come, though it appears that the worst of the liquidity crisis is over.  His comments dashed the hopes of investors that the Federal Reserve may raise interest rates by year end to curb inflation.

Data released on U.S. wholesale inventories for March shows an unexpected fall, which has prompted a cut in the estimated GDP for the first quarter of 2008.