| Dollar rises after ECB, BoE decisions -
February 9th, 2008
Dollar rises after ECB, BoE decisions
The dollar rose against the euro yesterday, as the Bank of England cut its benchmark interest rate by 25 basis points as expected, and the European Central Bank held rates steady.
The euro remained under pressure against the dollar after European Central Bank President Jean-Claude Trichet said euro zone growth risks are to the downside.
Annual euro-zone inflation remained at 3.2% in January, above the ECB's medium-term target of around 2%.
According to a survey the euro-zone purchasing managers' index (PMI) for the euro-zone services sector declined to 50.6 in January, the weakest reading since 2003.
But data from the US Labor Department released last week indicated productivity growth of US non-farm businesses slowed significantly, to a 1.8% annual rate in the fourth quarter from a 6% rate in the third quarter, which dampened the sentiments of investors in the dollar.
Data from the Institute for Supply Management released earlier this week was also bearish for the dollar. The ISM non-manufacturing index fell to a reading of 41.9% last month, down from 54.4% in December. It was the lowest level since October 2001, and also the largest one-month drop in the history of the index.
In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers January and again lowered the rate to 3 percent January 30th . The 75 basis point has been the largest cut in the fed funds rate since 1990.
The fear of economic slowdown spreading to other nations most of the policy makers are closely watching the economy.
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