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Dollar falls as Fed slashes rates Pound falls on signs of rate cuts
(about 4 hours later)
The dollar has fallen sharply against other currencies after the US Federal Reserve slashed its key interest rate to an all-time low. Sterling has hit another record low against the euro following weak jobless figures and signs that the Bank of England is set to cut rates further.
Many analysts expected a cut to 0.5%, rather than the Fed's move to 0.25%. The pound hit a low of 1.0796 euros before recovering to 1.0812 euros.
The dollar stood at $1.4094 against the euro, $1.5511 against the pound and 88.43 yen versus the Japanese currency. Meanwhile the dollar fell to a 13-and-a -half year low against the yen, of 87.79 yen, after the US Fed cut its key interest rate to an all-time low.
Meanwhile sterling fell to another record low against the euro amid expectations the Bank of England may cut its interest rates further. Many analysts had expected a cut to 0.5%, rather than the Fed's move to between zero and 0.25%.
The US interest rate is now the lowest among developed countries.The US interest rate is now the lowest among developed countries.
"This clearly hadn't been priced into markets with the dollar tumbling as a result," said James Hughes, a currency analyst at CMC Markets."This clearly hadn't been priced into markets with the dollar tumbling as a result," said James Hughes, a currency analyst at CMC Markets.
The dollar had fallen to $1.4192 against the euro in Asian trade, but then recovered slightly to $1.4065.
'Very negative''Very negative'
At the beginning of December, the Bank of England reduced its rate to 2% from 3%, and notes from its monetary policy committee showed it considered an even deeper cut. At the beginning of December the Bank of England reduced its key interest rate to 2% from 3%, and minutes from its rate-setting meeting showed it considered an even deeper cut.
Separately, it was reported that the number of people out of work rose to the highest level since June 1999, while those claiming unemployment beneift hit a 17-year high. Separately, latest figures showed that the number of people out of work in the UK had risen to the highest level since June 1999, while the number of those claiming unemployment benefit rose above one million.
"Sterling is coming under pressure after the claimant count figures were well above market expectations," Ian Stannard at BNP Paribas in London."Sterling is coming under pressure after the claimant count figures were well above market expectations," Ian Stannard at BNP Paribas in London.
"It shows the UK is moving toward recession and this is very negative for sterling"."It shows the UK is moving toward recession and this is very negative for sterling".
The pound stood at 1.1003 euros after hitting a record low of 1.0980 euros in earlier trading.