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Dollar Stands Firmly After Record Low TIC Inflow

September 16, 2008 by

EUR/USD declined today during the whole trading session as the stock markets were also falling globally. Now  U. S. indexes remain in the neutral zone, but the dollar still stands well against the euro, even after some really bad statistics from U.S. A rapid downfall of EUR/USD followed the Fed’s interest rate decision today and the currency pair now trades near 1.4119.

CPI at a seasonally adjusted rate dropped by 0.1% in August after 0.8% growth in July and zero change forecast for August. Declining prices is one of the worst enemies of the dollar since they allow Federal Reserve to perform interest rate cuts without worrying about the inflation growth.

Net foreign purchases of the long-term U.S. securities were extremely low in July — only $6.1 billion, after $53.4 billion total in June. That was an unexpected result as the average forecast for the capital inflow was at $55 billion.

Federal Open Market Committee decided to keep the federal funds rate at 2.00% today. That decision was expected by the market participants, although, some analysts believed that the rate would be cut today. Despite the consumer inflation declining recently and an extremely troublesome situation with the financial markets, FOMC showed no sign that the rates may raised soon.

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