LONDON (AFX) - The euro pushed higher against the dollar in early trade amid follow-through buying on the back of Wednesday's Federal Reserve rate cut, dealers said.
The euro rose as high as 0.9438 compared to 0.9305 in late London trade Wednesday. Citing further erosion of consumer and business confidence and weaker retail sales, the central bank cut its federal funds rate by 50 basis points to 5.50 pct from 6.00 pct, the second 50 basis point cut in a month.
With expectations of more rate cuts in the coming months, Divyang Shah, strategist at IDEAglobal.com, said investors were using this opportunity to sell the dollar.
"50 basis points has not been enough to soothe the market's concerns about the U.S. outlook," he said.
Because the next monetary policy meeting is not scheduled until March 20, economists at Deutsche Bank said the possibility of another inter-meeting rate cut is "high," particularly if today's January National Association of Purchasing Managers' survey declines further. Analysts expect the NAPM Index to fall to 43.3 in January compared with 44.3 in December.
Along with the NAPM report, participants focused on today's European Central Bank rate decision. Analysts forecast no change in policy. Dollar/yen held steady. Dealers said the growth concerns in the U.S. failed to support the ailing yen.
Meanwhile, sterling was firm, closely tracking euro/dollar. Analysts expect the Bank of England to cut rates by 25 basis points at next week's Monetary Policy Committee meeting.