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Fed Affords Dollar Brief Respite With Lower Rate Cut
Market had priced in full one percent cut


Paul Joseph Watson

Prison Planet
Tuesday, March 18, 2008

The dollar enjoyed its biggest gains against the Yen in nine years and pared losses against the Euro after the Federal Reserve delivered a lower than expected 75 basis points interest rate cut after traders had priced in a full 100 points cut.

Earlier today, we asked whether the Fed would act to shore up the dollar in the face of a growing outcry and talk of intervention by offering only a 50 basis points cut.

Before the decision, a growing number of traders were leaning towards a whopping 1.25 percent cut but the lower than expected move gave the dollar some brief respite.

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 Gold futures fell sharply below $1,000 an ounce but crude oil spiked following the announcement.

"The dollar didn't get crushed here," said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. "People were short dollars and long gold heading into this meeting. It looks like investors are taking some money out after this great rally."

"The Fed delivered the minimum to appease the overriding concerns of the market right now," said Mike Moran, a senior currency strategist at Standard Chartered in New York. "Risk sentiment is a little better" than at the start of the day.

However, with Gulf states set to creep away from the greenback by dumping their dollar peg, the respite is only likely to be short lived and we fully expect to see further dollar erosion on a gradual basis over the coming weeks and months.

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