Dukascopy Bank SA

Previous session overview
The US dollar dropped to a new record low against the euro Wednesday in New York in response to a cut in U.S. interest rates by the Federal Reserve. The dollar also lost heavily against its Canadian counterpart, touching its lowest level in modern times.

The euro broke the $1.45 barrier to $1.4506 after the Federal Open Market Committee announced that it would cut the federal funds target rate, by which banks lend to each other, and the discount rate, by which banks borrow from the central bank, by 0.25 percentage point each to 4.5% and 5%, respectively.

The dollar was able to maintain gains on the yen, after the Bank of Japan voted to keep interest rates on hold during Asian trading.

Late Wednesday during American session, the euro was at $1.4486, up from $1.4435 late Monday, while the dollar was at Y115.30, up from Y114.68. The euro was at Y167.05, up from Y165.57. The U.K. pound was at $2.0803, up from $2.0685, according to SWFX. The dollar was quoted at CHF1.1580, down from CHF1.1588.

Wednesday's late gains for the Canadian unit have simply been an extension of the rally set off following the U.S. Federal Reserve's interest rate cut. The Fed's 25-basis-point trimming of its benchmark rate eliminated the long-standing U.S. rate premium and brought administered U.S. and Canadian rates into alignment at equivalent 4.50% settings.

After data in the euro zone Wednesday confirmed rising inflation there, it's becoming clearer that the European Central Bank will keep its rate on hold when it meets Nov. 8, said analysts.

The dollar had gained against its two big rivals after gross domestic product data showed that the U.S. economy sped up in the July-through-September period on surging exports and stronger consumer spending and despite a downcast housing sector.

The ADP National Employment Report by Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers also showed a greater-than-expected increase of 106,000 in U.S. private jobs in October. That indicator is used by financial markets as a rough gauge ahead of the comprehensive nonfarm payrolls report out Friday.

The primary market mover overnight was the yen, which was hurt after Bank of Japan kept rates on hold and Governor Toshihiko Fukui acknowledged that the downside risks to the economy are growing.

Market expectation
The dollar failed to extend its gains against the yen in Asia Thursday as players decided to wait for further data to assess prospects for the U.S. economy following the Federal Reserve's decision to cut interest rates by 25 basis points overnight.

The Fed's statement Wednesday suggested further rate cuts may not come soon, pushing the U.S. unit higher against the yen overnight and early in the Asian session, dealers said. But many players soon headed for the sidelines as they waited for more U.S. economic numbers later this week, especially the employment data on Friday. This kept the greenback in a tight band against the yen, dealers noted.

Several indicators due later in the global day on Thursday are also expected to draw players' attention. One of them is September pending home sales at 14.00 GMT.

Other figures include the U.S. personal income and spending survey for September. The survey, due at 1230 GMT, includes the core personal consumption expenditures deflator, used by the Fed to assess inflationary risks.

Also on Thursday's release list is the Institute for Supply Management's manufacturing business index for October, tipped to come in at 51.6 compared with 52 the previous month.

Traders expect the U.S. unit to stay in a Y114.90-Y115.60 band against the Japanese currency for now.