Technicals

The Dollar rose against Euro on Wednesday on the view the European Central Bank might have to cut interest rates as doubts mount over the euro-zone's ability to deal with the global financial crisis.

Yesterday all day optimism that US lawmakers were about to approve the $700bio plan to stabilize the US financial system mainly supported the Dollar. At least, the plan which was rejected on Monday has been accepted yesterday night by the US senate. This revised version allows the Treasury to buy bad loans from banks to encourage fresh lending and boost economic growth.

European governments scrambled this week to shore up banks through nationalizations and capital infusions as the financial contagion from the US subprime mortgage mess spread across the Atlantic. The ECB meets today to decide on interest rates and could still leave its benchmark rate steady at 4.25%.

EurUsd dropped beneath the key 1.4000 level, trading as low as 1.3976. It was down 0.91% at 1.3991. Euro has been also hurt by data showing euro zone manufacturing fell to a near seven-year low in September, while the unemployment rate rose to 7.5% in August from 7.4%. UsdJpy fell to a session low of 105.33 after data showed that US factory activity shrank in September to its lowest since the 2001 recession. It recovered ending up 0.06% at 105.33. UsdChf was up 0.74% to 1.1277.

The Dollar also got a boost from a report showing US private employers cut a surprisingly low 8k jobs in September, according to ADP Employer Services. News that Britain's manufacturing sector shrank at a record pace in September pressured Sterling. GbpUsd was down 0.87% at 1.7676. The report raised the chances of a Bank of England rate cut next week.