During early deals on Wednesday, the US dollar declined to a 2 1/2-month low against the European currency and the Swiss franc. The dollar also edged down to new multi-week lows against the currencies of UK, Australia, Canada and New Zealand. Against the Japanese yen, the greenback touched a 5-day low.
In an unprecedented move, the Federal Reserve established a target range for the federal funds rate from zero to one-quarter percent yesterday, bringing the target to its lowest level in over 50 years. The highly unusual move of establishing a target range comes as U.S. policymakers face the most severe economic crisis since the Great Depression.
The Federal Open Market Committee, the monetary policy-setting arm of the Federal Reserve, added that the funds rate is likely to remain exceptionally low for some time due to weak economic conditions.
The federal funds rate has been cut 500 basis points since August of 2007, when the collapse of the housing and subprime mortgage markets touched off a ripple effect that has thrust the economy into its worst financial crisis since the Great Depression.
Against the European currency, the US dollar traded down during early deals on Wednesday. At 11:50 pm ET, the dollar declined to a 2 1/2-month low of 1.4194 against the euro compared to 1.4001 hit late New York deals on Tuesday. The next downside target level for the dollar is seen at 1.44 against the euro.
In Asian deals on Wednesday, the dollar edged down against the British pound. At 11:50 pm ET, the dollar touched a new multi-week low of 1.5706 per pound and this may be compared to Tuesday's closing value of 1.5594. On the downside, 1.59 is seen as the next target level for the dollar. The pound-dollar pair is currently trading at 1.5643.
The US currency edged down to 1.1096 against the Swiss franc at 11:50 pm ET Tuesday. This set the lowest point for the dollar-franc pair since September 30, 2008. If the pair drops further, 1.069 is seen as the next target level. The pair that closed yesterday's North American session at 1.1254 is currently trading at 1.1163.
The US dollar, which closed yesterday's New York trading at 88.91 against the Japanese yen slipped to a 5-day low of 88.25 during Asian deals on Wednesday. If the dollar-yen pair falls further, it may likely target a 13-year low of 88.17.
Japan's Cabinet office revealed today in a final report that the leading index declined to 85.2 in October from 89.2 in September. The October reading was revised up from 85. A year ago, the leading index was at 96.2.
During early deals on Wednesday, the greenback showed weakness against its Australian counterpart. At 11:50 pm ET, the dollar slipped to 0.7028 against the Aussie, compared to 0.6945 hit late New York Tuesday. This set the lowest mark for the buck since October 21, 2008. If the greenback slips further, 0.705 is seen as the next target level.
The US dollar edged down to 1.1956 and 0.5857 against the currencies of Canada and New Zealand at 11:50 pm ET Wednesday. This set the lowest point for the dollar since November 11, 2008. The next downside target level for the US currency is seen around 1.189 against the Canadian dollar and 0.593 versus the New Zealand dollar. The greenback closed Tuesday's North American session at 1.2023 and 0.5789 against the loonie and kiwi, respectively.
At 2.00am ET, Germany's Federal Statistical Office is expected to release final inflation report for November. Economists are expecting final figures to match the preliminary report released on November 26. The Italian statistical office is expected to reveal trade balance data for October at 4.00am ET.
At 4.30am ET, the Bank of England is set to publish minutes of the monetary policy meeting held on December 4. At the same time, the Office for National Statistics is scheduled to announce results of the labor market survey for November. The claimant count rate for November is expected to increase to 3.1% from 3%, while the ILO unemployment rate for three-month to October is forecast to increase to 6% from 5.8%. Jobless claims are expected to increase 45,000 in November.
Half an hour later, inflation report for November is due from the Eurostat. The CPI is forecast to fall 0.5% month-on-month, while the annual growth is seen slowing to 2.1% from 3.2%. The core CPI is forecast to grow 1.9%, at the same pace recorded in October. At the same time, Italian current account data is also due.
Market participants will be interested to see if the U.S. trade deficit has narrowed any further in the third quarter. The U.S. current account balance for the third quarter is forecast to reach a deficit of $179 billion, compared to the prior quarter's $183.1 billion deficit figure.
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