dollar foreign exchange rate is under threat

dollar foreign exchange rate is under threat

The Dollar exchange rate has slipped against many of its major peers after speculation that the world’s most powerful economies are finally preparing to take action over the Euro crisis, dampening demand for the greenback as a safe haven currency.

The Dollar Index fell after Federal Reserve Bank of Chicago President Charles Evans said recent U.S. economic data warrant “extremely strong accommodation.” The US economy posted disappointing job figures last week and showed a possible weakening of the nation’s overall economy.

The dollar foreign exchange rate is under threat of further weakening as the Federal bank’s chairman Ben Bernanke suggested that the bank may implement further quantitative easing into the system.

“Finding a way to deliver more accommodation, whether it is monetary or fiscal is particularly important now because delays in reducing unemployment are costly,” Evans said in a speech yesterday in. “Failure to act aggressively now will lower the capacity of the economy for many years to come.”

The European central bank is set to meet today with rumours abound that the bank may cut interest rates further.

“While the outcome is by no means clear-cut and not pre- warned by the ECB, a rate cut would at least help to alleviate a little of the pain in Europe,” Mitul Kotecha, head of global currency strategy at Credit Agricole Corporate & Investment Bank, said; “The fact that the euro-dollar has a reasonably strong correlation with interest-rate differentials over the past three months suggests that the euro will actually come under pressure in the wake of such a move.” If that is the case then the dollar will benefit as investors turn back to it for a safe haven.

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