Dollar recovers after rate move

[eppur_se_muova]

Source: BBC

The US dollar has recovered from recent lows against the euro and yen after the Federal Reserve cut interest rates by a smaller margin than expected.

Lower interest rates typically make the dollar and dollar-denominated assets less attractive to investors.

The dollar saw its biggest one-day rise against the Japanese currency since 1999 to trade at 99.55 yen.

The euro fell to $1.5635, down from Monday's record peak of $1.5904 hit after the meltdown of Bear Stearns.

Read more: http://news.bbc.co.uk/2/hi/business/7302327.stm

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A one-day response to a 0.75% rate cut does not a "recovery" make.

[napoleon_in_rags]

1. Man the bipolar nature of it all is freaking me out.

I would feel more confident in a nice slow recovery.

[ColbertWatcher]

3. Agreed n/t

[tabasco]

2. "Recovered" to $1.56/euro.

That's a laugh.

[louis-t]

4. THAT'S HUGGGGGEE!!!!

3 whole cents.:wow:

[2Design]

5. all my savings account went down 1% so it is falling n/t

[Amonester]

6. I wonder what tomorrow's (or another day soon's) headline

will be, once this short-lived "recovery" bubble busts...

[truthisfreedom]

7. Bumpy!

[happyslug]

8. 2.25 % if BELOW the Inflation Rate. The Fed is giving money away.

Let look at the inflation Rate:
http://www.inflationdata.com/inflation/inflation_rate/HistoricalInflation.aspx
http://www.miseryindex.us/irbyyear.asp

Inflation is expected to equal or exceed 4% for the next three months then drop to about 3.8% for the following three months (I think this site is optimistic about what inflation will be six months from now):
http://www.forecasts.org/inflation.htm

Official Department of Labor Site:
http://www.bls.gov/cpi/cpid0802.pdf
(This site says 4.7% ANNUAL Rate for the six months ending in February 2008)
You have to look for the date, it is in there but you have to look).

The "Core" Inflation rate for February 2008 was .5%, but that was a month rate NOT an annual rate. If you multiply it by 12 you get 6.0% Which is why we may NOT have heard of it this month. Generally the Core Inflation rate is BELOW the Consumer price Index (CPI) inflation rate. Please note other reading lead me to believe the Annual Core Rate is not simply a Multiplication of the monthly rate. Probably has to do with two to three more places beyond the decimal point for the monthly rate. Below I cite a site that mention the Core annual rate is 3.1%, if you divide that by 12 you get a little over .25%.

For data on the .5% core rate in inflation for February 2008:

http://www.iht.com/articles/ap/2008/03/18/business/NA-FIN-ECO-US-Economy.php

The site that provides the 3.1 % Annual Core Inflation rate. The following site gives January 2008 Core Inflation as .3% which leads to a .25% Monthly Core inflation rate.
http://www.actionforex.com/fundamental-analysis/daily-forex-fundamentals/us:-reviving-core-inflation-2008022037280/
The Site also says the Annual rate was 3.1% (Which is just under 12 times .3 Core Rate).

My point is at 2.25 % the Fed Rate is now not only below the Consumer Price Index inflation rate but is also below the CORE Rate of Inflation. The Fed is in effect giving money away. I remember Japan doing this in the early 1990s during the collapse of its property boom, will the US economy stagnant like Japan's did in the 1990s? I.e. stagnate for over a decade?

[hedgetrimmer]

9. It's a wee tiny crutch that Dick Cheney's fat ass will break tomorrow.

[Selatius]

10. It should more appropriately be called a "bounce" or a "bump." "Recovery" is too misleading.

If the Fed really wanted to fight inflation and push the value of the dollar up, it would actually be raising interest rates, not dropping them.

[eppur_se_muova]

12. I was thinking "upward hiccup" in the midst of a long downward slide. nt

[bemildred]

11. Isn't there something wrong when a rate cut "bolsters" a currency? nt