FX Daily Commentary – Finotec

US dollar steady vs. euro after a sharp gains yesterday

 

By Rodian Rahnayev

Finotec Analysis Team

17 January 2008

 

 

On Wednesday, comments from European Central Bank official that U.S. economic slowdown may be spreading to Euro zone and decrease growth forecasts for 2008 that lead to radical drop in euro currency against the major and especially the dollar.

However, the negative sentiment in U.S currency still strong due to the market expectation that the Federal Reserve will cut the central bank`s short term interest rate by at least 0.5% at its next regular policy meeting on Jan. 29-30 to stimulate the slump in U.S. economy. In front of it seems that the ECB monetary police will remain unchanged at 4.0%.

The yen stayed away from a 2-½ year high against the dollar hit in the previous session but was supported as Japanese institutional investors were seen repatriating funds from investment abroad. Japanese investors were sellers of the dollar and other currencies against the yen on Wednesday when the yen surged against the dollar to 105.92 yen; it’s highest since May 2005.

Investors will be focused on Fed Chairman Bernanke’s words later in the day for clues on how likely the U.S. central bank is to slash interest rates this month. Market players are also on the lookout for developments in Washington over a possible stimulus package for the struggling economy that President George W. Bush has said he is considering. Other highlights on the data front on Thursday will be U.S. December housing starts and weekly initial jobless claims.