Tuesday, November 07, 2006

Dollar Weakened During Election Uncertainty

The dollar fell across the board as some investors took profits on the dollar positions before the result of U.S. midterm elections. The euro broke 1.28 level against the dollar in the U.S. session and returned back to around 1.2770 later.

The dollar ended its rally since last Friday on strong jobs report. Though the election is not likely to shake the market too much, the uncertainty of the election result became a reason for profit taking and the dollar was pushed lower.

Two Fed regional president, Moskow and Pianalto yesterday talked down the expectations for a rate cut by next March. They indicated that the Fed might need to raise rates again to curb inflation. Interest rate futures pricing indicate traders see only 11% chance the Fed will cut the interest rate by the end of next March.


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