Today, in early trading, the U.S. Dollar fell versus the Euro, Pound Sterling, and several high-yielding currencies. This follows a reduction of a key interest rate by the Federal Reserve Bank, which helped to calm extreme risk aversion and boosted European shares. It was widely expected that America’s central bank would reduce the key interest rate from 1.50% to 1%. There is a possibility of further rate cuts, if the need arises.
Separately, the Federal Reserve Bank also approved currency swap facilities with central banks in several emerging countries, which will make the U.S. Dollar available to help them cope with the global credit crunch.
On October 20, 2008 at 09:03 GMT, the Euro rose by 1.3% to $1.3125 in unstable trade, pulling away from $1.2329, a 2½ year low that was reached last week.
Shares in the European markets rose by 0.5% in early trade, following dramatic gains in trading in markets in Asia, where, on average, stock prices rose 10% on Japan’s Nikkei. The Pound Sterling rose by approximately 1% against the U.S. Dollar to $1.6564. At the same time, the U.S. Dollar climbed by 1% to 98.40 Yen.