The U.S. Dollar weakened against major currencies on Thursday in mid-morning trading in Sydney as traders reacted to a sharp decline on Wall Street on renewed worries about the U.S. economy and the rising oil prices.
On June 11, 2008, at 09:45 am (23:45 GMT) in Sydney, the U.S. Dollar traded at 106.86 Yen, compared to 106.93 Yen, while the Euro traded at $1.5556, compared to $1.5555 in late trading in New York.
Following the release of the Federal Reserve’s “Beige Book,” this confirmed that economic activities during the past two months, i.e. April and May, remained weak, investors pared back their expectations that the Federal Reserve will hike interest rates towards the end of the year. However, officials of the Federal Reserve continue to make hawkish comments about the need to tackle inflation, even if the economy is weak.
Most analysts agree that the foreign exchange market is unable to determine the direction of interest rates due to the frequent shift if Fed’s expectations. Furthermore, analysts have not fully comprehended the impact of rising inflation, caused by high commodity prices, record high oil prices and weak economies, on the outlook for interest rates.