Dollar boosted as speculators bet on Fed raising rates

Currency speculators betting on a rise in US interest rates after the Federal Reserve’s decision to increase the rate at which it lends to banks have pushed the dollar to hit nine-month highs against sterling and the euro.

James Quinn
Telegraph [UK]
19 Feb 2010

The greenback’s strength – at one point also touching eight-month highs against a basket of major currencies – came despite Fed officials attempting to play down the importance of Thursday night’s move to raise the discount rate from 0.5pc to 0.75pc .

Central bankers, led by Fed chairman Ben Bernanke, are concerned that even speculation about a rise in interest rates could slow output, weakening the US’s nascent economic recovery.

Bill Dudley, president of the Federal Reserve Bank of New York, took the unusual step of saying the Fed’s promise to keep borrowing costs low for an extended period is “still very much in place”.

Traders appeared to ignore the central bank’s reassurances, however, instead buying the dollar ahead of what they believe will be an increase in the Fed’s base federal funds rate.

The article continues at the Telegraph.

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