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Dollar steady ahead of rate move Dollar recovers after rate move
(about 13 hours later)
The US dollar has recovered from the record low set against the euro on Monday as investors await an interest rate decision from the US central bank. The US dollar has recovered from recent lows against the euro and yen after the Federal Reserve cut interest rates by a smaller margin than expected.
By 1117 GMT a euro was buying $1.5821, down from Monday's record level of $1.5904, hit after the emergency sale of Bear Stearns bank over the weekend. Lower interest rates typically make the dollar and dollar-denominated assets less attractive to investors.
The failure of Bear Stearns raised fears that the credit crunch is getting worse and is damaging the US economy. The dollar saw its biggest one-day rise against the Japanese currency since 1999 to trade at 99.55 yen.
The US Federal Reserve is expected to slash its key interest rate on Tuesday. The euro fell to $1.5635, down from Monday's record peak of $1.5904 hit after the meltdown of Bear Stearns.
Some economists say the Fed funds rate could be cut from 3% to 2%. The fire sale of Bear Stearns over the weekend raised fears that the credit crunch is getting worse and damaging the US economy.
"Anything less than 100 basis points (1%) of cuts will disappoint the market, and I think the initial reaction will be one of dollar weakening," said David Pais, currency strategist at Citi. The Federal Reserve cut US interest rates to 2.25% from 3% in an attempt to restore confidence to nervous financial markets and boost the ailing economy.
"It's hard to see what will give the dollar a boost at the moment." he added. Markets had been betting the Fed would cut rates by a whole percentage point.
A dollar was buying 97.41 yen, well off the low hit on Monday of 95.72.
Meanwhile, the pound strengthened against the dollar, buying $2.0166.
Overnight, it dropped below the $2 level.