Major Central Banks coordinate interest rate cuts. Yen and U.S. Dollar climb amid turbulence. | CountingPips Forex Blog

October 8, 2008 - Forex Economic News

Major Central Banks coordinate interest rate cuts. Yen and U.S. Dollar climb amid turbulence.

Major central banks around the globe, in an unprecendented move, coordinated reductions in their respective interest rates today in a bid to ease pressures of the credit crisis and crashing global stock exchanges. The U.S. Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, Bank of Canada, Riksbank of Sweden and the Chinese Central Bank all reduced their interest rates this morning in effort to stem market fears and slowing economies around the world. The US Fed reduced the key U.S. interest rate by 50 basis Global Economic Crisis - Yen gains in Forex Market points to 1.5 percent while the ECB cut 50 basis points to 3.75 percent, the Bank of England cut 50 basis points to 4.50 percent, Sweden's Riksbank cut 50 basis points to 4.25 percent and the Bank of Canada also cut 50 basis points to 2.50 percent. The Swiss National Bank reduced its interest rate target range of 2.5-3 percent by 50 basis points to a new target range of 2-3 percent with a median rate of 2.5 percent. The Chinese Central Bank reduced its one year lending rate by 0.27 percent to 6.93 percent.

The joint central bank statement touched on the concern for global economic growth and the declining inflationary pressures that have led to the coordinated rate reductions.

"Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.

Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions."

The U.S. Fed statement on U.S. economic data, inflation and the rate reduction said, "The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures. Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation."

Forex Market - The Yen and U.S. Dollar continue to climb amid turbulent times.

The yen continued to show positive gains in the forex market throughout the financial turmoil as the Japanese currency has gained against all the major currencies today. The euro fell against the yen to trading at 136.07 today after opening at 137.84. The U.S. dollar has declined vs. the yen to trading at 99.51 after opening today at 101.45. The USD/JPY has Yen gains in Forex Trade fallen below the 100 yen per dollar mark for the first time since March 31st 2008. The British pound has fallen to 173.03 yen per pound after opening at approximately 177.81 today. The Swiss franc has dropped to trading at the 88.09 level from today's open at 88.87 against the yen. The Aussie has plummeted to 66.44 yen per aussie after opening at 72.09 and the Canadian loonie has also declined verse the Japanese currency to trading at 88.61 after opening at 91.80 yen per loonie.

The U.S. dollar, meanwhile, has been mixed as the American currency has shown gains verses the Aussie dollar, New Zealand kiwi, Canadian loonie, British pound sterling while falling today verses the Japanese yen, European euro and Swiss franc.

GBP/JPY Chart - The British pound sterling falls against the Japanese yen today in currency trading after the coordinated interest rate cuts by major central banks(Daily Chart).

Today's Forex Chart

tags: market crisis, forex market, yen, dollar, interest rates

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