The Dollar rallied against most currencies on Thursday, buoyed by demand from US corporations seeking to square their books by month-end and those scrambling for cash to cover a seasonally thin year-end period.
The Yen also rallied broadly after steep losses in the previous two sessions on worries about the state of global credit markets.
Analysts said US data on jobless claims and New Home Sales for October did little to alter expectations that the Federal Reserve will reduce interest rates by 0.25 to 4.25% next month after it cut them by a cumulative 0.75 since September to cushion the economy from a severe housing slump and credit market turbulence.
Some are even predicting the Fed will ease by 0.50. But expectations of a rate cut failed to stem the rally in the Dollar, as markets remained focus on the ongoing global credit crunch and the need to stay liquid. Some analysts have suggested rate cuts could help the dollar indirectly as they would help avoid a US recession. Lower rates typically make Dollar-denominated securities less attractive, reducing demand for the currency. However, given concerns about persistent weakness in the US housing and credit markets, signs that the Fed will continue to act to help the US economy should attract investment inflows.
EurUsd was down 0.55% at 1.4758. GbpUsd dropped by 0.77% to 2.0625.
UsdJpy was little changed +0.09% to 110.06. Traders said it was being pressured by trading in EurJpy which was down 0.4% at 162.51.
Fed Chairman Bernanke said late on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the US economy, signaling an openness to again lowering interest rates.