Friday, October 31, 2008

US Dollar Strength/Gains

Dollar gains against rival currencies Friday October 31, 12:06 pm ET by Ben Rooney, staff writer
The U.S. dollar rose against its main trading partners Friday as investors took shelter in lower-yielding currencies at the end of a volatile month in global financial markets. The euro fell 1.4% to trade at $1.2725 from %1.2923 late Thursday in New York. Britain's pound was down 1.5% at $1.6196 from $1.6039. The dollar was up against the yen at ¥99.02 from ¥98.25. The greenback fell to an overnight low of ¥96.72 but regained ground after the country's central bank cut a key interest rate. In a widely anticipated move, the Bank of Japan lowered its benchmark interest rate. But wary investors in Japan were expecting a more aggressive cut and Japan's Nikkei index fell 5% despite the news.

Central banks worldwide stepped up efforts this week to forestall a global recession. The Federal Reserve cut its key interest rate Wednesday to 1% from 1.5% and announced plans to extend currency swaps to a number of central banks in emerging markets. European stocks were higher in afternoon trading following a rocky start. In the United States, shares were also trading higher despite dour economic data.

A report from the Commerce Department showed Friday that consumer spending declined 0.3% in September. That followed data released Thursday showing the nation's economy shrank in the third quarter. Currency strategists say Friday's trade could be volatile as money managers seek to balance portfolios at the end of one of the most difficult months in Wall Street's history.
"With equity markets down 15-20% over the past month and today the last day of October, today could see some ghoulish month-end rebalancing flows, making the session difficult to handicap," said Steve Malyon, currency analyst at Scotia Capital in Toronto.

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