Global markets have seen volatile trade since last year on mounting losses in the US subprime sector as customers who received housing loans despite inconsistent credit histories default on mortgages. There are growing concerns that the US economy is sinking deep into the recession and hence the US Feds are expected to cut its benchmark interest rate by at least 50 basis point at its March 18 meeting. The dollar was also weighed down by uncertainties on the size of the rate cut the Feds are likely to implement next week
Markets have also been widespread with expectations about a possible emergency cut before that. Further rate cuts are expected to keep the dollar under high pressure as investors tend to dump the greenback and seek higher yields elsewhere. Unless the US authorities take more concrete and aggressive measures which can eliminate the root of the cause of the credit crunch crisis, the dollar is most likely to continue its trend to the downside.
The US dollar dipped to a new all time low against the euro overnight as investors bet on a hefty cut in US interest rates next week. The euro briefly hit 1.5590 dollars eclipsing its previous record high of 1.5570 which puts the dollar totally out of market favor now. While US interest rates are expected to be slashed aggressively, the Euro zone authorities are concerned about inflation pressures which disable the ECB to cut interest rates for the time being allowing the euro to stay at high levels.
Elsewhere, the British pound is maintaining the bullish momentum quoting at 2.0321 rising on the back of a weak dollar.
Meanwhile, the yen is benefiting from the US weakness as investors are getting out of dollar assets leading to a dollar crash hence pushing the pair to the downside to record at this hour a low of 100.02 after recording a high of 101.69. A hefty cut in the US interest rates expected next week also weights more pressure on the dollar pushing it to slump to a 12 year low against the yen.
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