Forex: Euro Hits 9-Month Low As Fed Hikes Discount Rate
February 18, 2010

– From “The Brewer Blog”, by Brewer Investment Group –

The U.S. Dollar is mounting a strong rally late in the trading session following news that the Fed is set to hike the discount rate by 25 basis points to 75 basis points. While not actually beginning a tighter monetary policy, a hike in the borrowing rate charged to member banks is a sign that the Fed is getting ready to begin removing stimulus and raising other key interest rates. The Dollar is rallying because the rate hike tightens the interest rate differential between the U.S. and other foreign nations.

On Thursday, the Dollar had a volatile trading session triggered by economic reports and rumors of intervention. The Greenback opened higher, driven by spillover from Wednesday’s strong U.S. economic data. Early during today’s session the Dollar got a boost from mixed economic news. The Producer Price Index was higher than expected, but weekly jobless claims rose. This was followed by a better than expected Leading Indicators report and Philadelphia Fed Survey.

Initially, these reports supported the Dollar but a recovery in the equity markets encouraged speculators to demand more risk. This slowed down the upside momentum in the Dollar as intra-day profit-takers took over.

You must be logged in to view the rest of this article. If you do not have an Investrend Weblogs account, it is free to register.

Disclosure / Disclaimer: Investrend does not edit the weblog content posted here. Investrend Weblogs content is posted as it is submitted by its authors, and weblog content may not reflect the views and/or opinions of Investrend. Also, authors may trade in subject securities and/or otherwise have a vested interest in other securities and/or funds and/or companies, either directly and/or indirectly related to content appearing here.