The greenback fell broadly against euro and the Japanese yen on the first trading of year 2008 after a private report showed U.S. manufacturing unexpectedly contracted in December together with the record crude oil prices.
The Institute for Supply Management's factory index fell in December to 47.7 (forecast was 50.4), the lowest reading since April 2003, from 50.8 the previous month. Crude oil price rallied by 4% to a record high of 100 per a barrel. Gold rose strongly to a fresh multi-year high of 861.00.
Interest-rate futures indicated 100% chance that the Federal Reserve will cut borrowing costs this month. Minutes of the Federal Open Market Committee's December meeting showed that members of the Federal Reserve worried that a credit crunch could sharply brake economic growth and require big interest rate cuts. The members also realized that financial market conditions might improve more rapidly than they expected.
The greenback tumbled versus the Japanese yen from 112.10 to 109.22, the lowest since Nov. 28., due to active cross buying in jpy. Euro, aussie, sterling fell sharply from 164.06 to 161.00, from 98.56 to 96.22 and from 222.73 to 216.50 respectively on the sharp selloff in U.S. stocks. Dow Jones index fell 221 points whilst
The British pound tumbled to 1.9898 to 1.9774 on active cross selling in sterling despite dollar’s broad-based weakness. Euro rose to a record high of 0.7448 against the sterling on speculation the Bank of England will cut its interest rate from 5.5%.
Thursday will see the release of German unemployment rate, U.K. PMI construction, the closely watched U.S. ADP employment, factory orders and revised durable goods data.