Forex News and Rumors for October 8th, 2008

Shock 0.5% UK interest rate cut as part of international plan

The Federal Reserve led the way, slashing its key federal funds rate by half a point to just 1.50 per cent. At the same time, the Bank of England cut its base rate by the same amount to 4.50 per cent and the European Central Bank also announced a half-point cut to 3.75 per cent. The Swiss, Canadian and Swedish banks joined in while China also trimmed rates.

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Central Banks Coordinate Cut in Rates

Included in the move to cut rates were the Federal Reserve, the Bank of England and the European Central Bank as well as those in Canada, Sweden and Switzerland.

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Britain Announces Huge Bank Bailout

Britain announced a three-part multibillion-dollar bailout for its
beleaguered banks on Wednesday, and Spain moved to mount a separate rescue
of its own banking sector.

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Russia’s leading markets closed

Micex has suspended trading until Friday after share prices fell 14% in
the first half hour of Wednesday trading. The RTS exchange has also
suspended trading after falls of 11%, though no time frame has been set
for it to reopen.

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Nikkei plunges 9% to 5-year low on panic selling

Tokyo stocks nosedived Wednesday, with the key Nikkei index plunging more
than 9 percent to a level unseen in more than five years.

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Yen Rises Beyond 100 level Against US Dollar As Carry Trade Unwinding Intensifies

Wednesday during early deals, the Japanese yen rose beyond the 100 level against the dollar for the first time in six months as a global stock market sell-off triggered large scale unwinding of carry trade positions.

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Riksbank Lowers Key Interest Rate

Wednesday, the Executive Board of the Riksbank decided to cut the repo rate by 0.50 percentage points to 4.25% in a coordinated action with other global central banks to dampen the consequences of the ongoing financial crisis.

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Dollar Falls Versus Euro on Joint Rate Cuts by Central Banks

The dollar dropped 0.7 percent to $1.3679 per euro at 7:46 a.m. in New York, from $1.3588 yesterday. The U.S. currency fell 0.9 percent to 100.53 yen, from 101.47. The euro declined 0.3 percent to 137.53 yen, from 137.89.

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Australian, New Zealand Dollars Fall to Lowest in Five Years

The Australian currency fell the most since 1983 as rising exchange-rate swings, a drop in commodity prices and a rout in stock markets damped the appeal of the so-called carry trades. It tumbled for the 11th day against the U.S. currency, losing 21.3 over the period, on concern investors will reduce bets on Australian and New Zealand assets funded by loans in countries where borrowing costs are lower.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza