By James Quinn, Wall Street Correspondent
Last Updated: 1:10am GMT 29/01/2008
The dollar slid by more than a cent against the euro after a drop in new home sales across the US strengthened traders' expectations that the Federal Reserve will again cut interest rates tomorrow.
New home sales fell 4.7pc to a 12-year low in December as the impact of the sub-prime crisis weighed on the country's housing market.
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The drop - worse than economists had expected -pushed the dollar to almost $1.48 against the euro, with sterling strengthening by 0.3 cents to $1.9843.
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Fed chairman Ben Bernanke surprised financial markets last week by cutting rates 0.75 percentage points to 3pc, the largest single cut since 1984.
Alan Ruskin, a currency expert at RBS Greenwich Capital Markets, said: "The Fed will cut 50 basis points, and they will send the message that they will not close the door for further easing if things deteriorate."
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http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/29/cndollar129.xmlAre they so sure that they even wrote the wrong number? I thought it was cut to 3.5pc not 3pc?
Fed expected to cut rates again
By Krishna Guha in Washington
Published: January 28 2008 20:52 | Last updated: January 28 2008 20:52
The Federal Reserve is expected to ram home its new aggressive approach to fighting the risk of a protracted US recession with a further interest rate cut on Wednesday, hot on the heels of its unprecedented 75 basis point cut last week.
Analysts debate whether the Fed will cut 50 basis points or 25. “I think we will get 50,” said Peter Hooper, chief economist at Deutsche Bank
He said the Fed built up expectations of a 50 basis point reduction through the statement that accompanied the emergency 75 basis point cut. The statement said “appreciable” downside risks remained even after the 75 point move and promised “timely” action.
Since then the US central bank has made no effort to suggest that the market’s interpretation of the statement is wrong. Officials insist the news that unwinding of rogue trades at Société Générale amplified the global sell-off in equities at the start of last week has not changed their thinking.
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http://www.ft.com/cms/s/0/3f8e1ca6-cde1-11dc-9e4e-000077b07658.html