Forex – Fed’s rate cut distressed Dollar versus Euro

The US Dollar pulled back against most of the major currencies after a slash down in the interest rates by the Federal Reserve yesterday. The US Dollar remained volatile in the financial market that resulted panic to the Federal Reserve. As a result, the Federal Reserve slashed its funds to 3.5 % from 4.25%. On account of this slowdown in the global stock market, initiated by the fears of a US recession there are expectations for further rates cut which can be executed in the coming week.

The most astonishing thing is the biggest slash in the interest rates by the US central

bank, which can either bring back the economy to its earlier pace or can either weigh to its currency as lower interest rates will compel the investors to withdraw funds from low yielding currency, to the currency of that country from where they can yield high returns. High interest rates attracts the investors and leads to more income generation, in contrast to that lower interest rates discourages the investment but compels the investors to borrow from the country providing cheap financial credit and invest in high yielding assets.

The interest rate slash by the Federal Reserve washed off the gains which the Dollar was enjoying over the European currency. However, this decline in interest rates will raise the Euro in the short term but in the long term it will definitely bring higher yields to the US Dollar, and will bring the US economy back to its earlier pace which is the basic reason for the decline in interest rates by the Fed. According to the www.forexwebtrader.com analysis report the euro which was before trading at 1.4622$ is recently trading at a high of 1.4634$ it rebounded against the Dollar after a month low on account of decline in the US interest rates by the Federal Reserve.


Analysts are doubtful on account of Fed’s surprising decline in interest rates whether it will ease the fear of a recession in the US economy, as lower interest rates contributes very little support for the weaknesses in the US housing sector and the economy. There can also be the conditions which can be worse than ever predicted by the investors