By Cornelius Luca
New York, March 21 (BridgeNews) - Less than 24 hours after Federal Reserve cut its main short-term interest rate target and the discount rate by 50 basis points to 5.00% and at 4.50%, respectively, the dollar overcame Tuesday's knee-jerk sell-off and surged across the board. The greenback hit new 22- and 31-month highs versus the Japanese yen and Canadian dollar, respectively, and reversed losses made against the major European currencies.
* * * The rebound will likely continue in the U.S. session on a mix of short covering and fresh long positions, as the dollar should impress once again with its resilience. The big question mark will be the domestic equity markets.
Stocks crumbled Tuesday, with the Dow and Nasdaq hitting five- and 27-month lows, respectively, on disappointment that the Fed didn't trim rates by 75 basis points. Equity futures currently point to a negative open.
The domestic events agenda will be dominated by the release of the February consumer price index, which expected to rise 0.2%. Dollar/Canada extended its uptrend to 1.5743 mostly on ongoing bullish momentum, and in small part due to a 0.4% monthly increase in the Canadian CPI. More importantly, traders are watching carefully whether the Bank of Canada will intervene to support its currency, which is close to its record low of 1.5850.