Forex View: Dollar's Direction? Down; Likely Fed Rate Cut Promise More Pain For Sliding Currency
The dollar's relentless decline looks set to continue this week, when an expected interest-rate cut by the Federal Reserve will add to the forces arrayed against the sagging currency.</br></br>Already under intense pressure from signs the U.S. is in recession and the crisis atmosphere in the U.S. financial sector, the dollar's fall last week through some significant psychological levels has intensified negative market sentiment.</br></br>The euro breached $1.55 to hit another set of lifetime highs against the dollar. The U.S. currency on Friday traded below parity with the Swiss franc for the first time. It likewise is in full retreat versus the yen, falling below 100 yen to its lowest levels in nearly 13 years.</br></br>This is the dark corner from which the dollar confronts the likelihood of another considerable Federal Reserve rate cut tomorrow that would only put it at a greater disadvantage against currencies from countries where rates are higher.</br></br>That prospect has many wondering whether tomorrow's expected rate cut might not tip the dollar's deterioration into a disorderly rout, in turn requiring coordinated central-bank intervention to restore some two-way risk to the market.