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Euro Makes a Comeback

Thursday, 11 Dec 2008 | 11:55 AM ET

The US dollar fell across the board Thursday on lower risk aversion among investors, helped in part by the latest monetary actions by central banks from around the world.

Comments from European Central Bank Board member Juergen Stark late Wednesday suggested that the ECB may not have a lot of room for maneuver on rates following last week’s 75-basis point rate cut.

Implied euro/U.S. rate spreads moved in the euro’s favor as expectations prevailed that the U.S. Federal Reserve would lower interest rates next week.
Following the news, the euro surged to its highest level since October 30 versus the US dollar. Against the pound sterling, the euro hit a record intraday high 0.8907 pence.

The euro also rose to its highest level since October 2 against the Swiss franc, while the greenback traded at its lowest level since November 26 versus the Swiss currency.

The dollar’s strength in recent months amid high-risk-aversion among investors could cool off as volatility comes down, according to analysts’ statements today. The VIX has fallen 38.62% from a record intraday high of 89.53 reached on October 24 of this year.

The dollar index , which tracks the greenback’s standing against a basket of currencies, hit an intraday low of 83.92, its lowest level since November 5. Year-to-date, the dollar index is up 9.56%.

Against the yen, the greenback hit an intraday low of 91.19 yen, its lowest level since October 24, while the euro hit an intraday high of 122.75 yen.

Further Rate Cuts

In the latest signs of monetary initiatives to ease access to credit Thursday, the Swiss National Bank slashed its interest rate by 50 basis points, sending its rate down to 0.50%. Today’s move by the Swiss National Bank marks its fourth rate cut in the past two months.

Monetary authorities throughout the world have been reducing interest rates as a measure to increase access to capital with the hopes that banks will be less reluctant to lend.

South Korea’s central bank decided to slash interest rates by 100 basis points to 3.00%, marking its biggest percent decrease since the policy system was incorporated in 1999. Asia’s fourth-biggest economy has slashed its interest rate four times since October.

Here is a look at where some of the world’s interest rates stand:




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