Forex - Dollar dropped to record lows on US recession fears
The Dollar dropped to all-time lows against the Euro and a basket of currencies on Wednesday after Federal Reserve Chairman Ben Bernanke signaled further interest rate cuts in the fight to avert a US recession.
Risks of a contraction in the world’s largest economy were again heightened by a report showing new US home sales fell in January to the lowest rate in nearly 13 years and housing inventories swelled, despite falling prices.
Bernanke’s reiteration that growth risks rather than inflation were the main focus for the US central bank left investors anticipating another 50bp cut next mon h.
Rising prices for oil and other commodities are stoking inflation pressures, putting the Fed in a difficult position. Rallying commodity prices helped drive currencies like the Australian Dollar, which rose to a 24-year peak, New Zealand Dollar and Canadian Dollar.