Technicals

The Dollar fell on Tuesday as steps by the Federal Reserve to calm chaotic financial markets and a signal by Chairman Ben Bernanke that the central bank was ready to cut rates eroded some of its safe-haven bid.

Moves by the Fed to create a facility to buy commercial paper caused investors to sell the Yen in favor of some European currencies that had been hammered on worries about the health of the global economy and lack of a coordinated response to the financial crisis from Europe.

Bernanke talked about further monetary easing, highlighting the fact that recent economic data and financial developments showed the outlook for growth has worsened. Also, ECB chief Jean-Claude Trichet last week signaled the central bank was ready to start cutting rates.

Analysts said investors were also unnerved by the continued decline of stocks on Wall Street despite measures by the Fed to free up seized short-term lending markets. US stocks plunged in their 5th straight declining session as fears mounted that the spiraling credit crisis would drag the economy into a deep recession. The slide capped the biggest 5-day point loss ever for the Dow Jones Industrial, which has lost about 1,400 points over the past 5 sessions or nearly 13%.

Analysts said the Dollar still remained a safe-haven, but cautioned that it could fall further against the Euro as its recent rally was seen as slightly overdone. They added that the ongoing credit crisis has started to impact the currency.

Yesterday, EurUsd rose as high as 1.3743, rebounding from a 13-month low 1.3443 hit on Monday. It was last up 0.38% at 1.3571. EurJpy rose 0.13% to 137.48 after posting 141.08 high. UsdJpy dropped 0.24% to 101.31 having hit 103.29 intraday high. UsdChf was 0.51% lower at 1.1415. GbpUsd rose 0.19% to 1.7464 having hit 1.7318 2 -year low.