Dollar Remains Mixed Ahead Of FOMC

Monday, December 10, 2007 1:09:40 AM - Early Monday in Asia, the US dollar showed mixed performance against the major currencies. The greenback extended its last week`s gains against the yen but it showed weakness against the British pound. Against the euro and the Swiss franc, the US currency has gained slightly during the session.

In the past week, which was busy with monetary policy announcements by major central banks, the US dollar showed mixed performance against its key counterparts. The greenback closed down against the euro and the franc in the week ended December 7, reversing the previous week`s result. Against the yen and the sterling, the buck extended the gains posted the previous week and fetched new multi-week highs. The US currency also remained higher against its Canadian counterpart and leveled a 2Ѕ -month high during the past week`s deals. While the greenback closed the third straight week down against the New Zealand dollar, it showed strength against the Australian currency.

The Australian and the New Zealand central banks held the rates unchanged at 6.75% and 8.25% respectively, but their counterparts in Canada and the UK unexpectedly cut benchmark interest rate by 25 basis points each, citing downside risks to growth. The BoC set the key interest rate at 4.25% and the BoE lowered it to 5.5%. However, as expected, the European central bank did not alter its monetary policy this time, leaving the cash target at 4%.

The Biggest losers of the week were the pound and the Aussie, the former tracking the interest rate cut, and the latter on the downside risks to growth signaled in the statement released by the Reserve Bank of Australia along with its monetary policy announcement. Some of the market players expect the BoE to come with more cuts in the near future as the sub prime issue stemmed from the US housing market has caused severe damage to the British economy. The statement issued by the RBA, the first such a note from the central bank, highlighted the concern about the weakness of the global economy, and it prompted investors to pare hopes of a rate hike early next year.
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