U.S. dollar rides on expectations

A British pound atop a U.S. dollar

TEXT OF INTERVIEW

Scott Jagow: One major concern about the Fed cutting interest rates is the dollar. As rates get lower, so does the dollar's value.

Let's check in our man in London, Stephen Beard. Stephen, how's the dollar doing today so far?

Stephen Beard: The dollar is still under a lot of pressure. It's fallen this morning against both the yen and the euro. This on the expectation that the Fed will cut their key Fed funds interest rate by as much as 1 percent. Now, that may or may not help ease the credit crunch. But the one thing it definitely will do, it will make the dollar a less attractive currency to hold. And the U.S. currency, of course, is still the world's major reserve currency.

Jagow: What do European investors think about a 1 percent cut in the Fed's rate?

Beard: Well, they hope that it works, but of course, this interest rate is the official rate at which the banks lend money to each other overnight. But the actual rate at which they're doing so is higher, because the banks remain very, very nervous about lending to each other. So there's a lot of hope, but also a lot of pessimism that even a cut of 1 percent won't solve the credit crisis.

Jagow: I also saw that the dollar was actually gaining ground against the pound?

Beard: That's right. Investors fear that the U.K. has followed the American economic model so assiduously over recent years, and so the fear is that a big British investment bank could suffer the same fate as Bear Stearns.

Jagow: I hope not. All right, Stephen Beard in London. Thank you.

Beard: OK, Scott.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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