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US Dollar Falls After China Kept Interest Rates Unchanged

December 13, 2010 at 19:08 by Vladimir Vyun

US DollarThe US dollar weakened today as China kept its interest rates unchanged, reducing the concerns about the possible China’s actions to slow the Chinese economic growth and damping the demand for the safer currencies.

The market participants were worried that China would raise the interest rates to slow the accelerating inflation, which reached 5.1 percent in November from a year earlier. The possible rates hike and the resulting slowdown of the Chinese growth was concern for everybody as China is the main driver of the global recovery, while the US and Europe struggle with their problems. China decided to leave the rates unchanged, instead draining the money from the financial system by setting the reserve requirements for the banks higher.

The MSCI World Index of equities gained 0.9 percent and the Standard & Poor’s 500 index rose 0.4 percent. The dollar also slipped on the speculation that the US Senate may vote against the tax cuts proposed by the President Barack Obama.

EUR/USD jumped from 1.3204 to 1.3382 as of 17:08 GMT today after it fell previously to 1.3181. GBP/USD rose from 1.5799 to 1.5884, following the drop to the intraday low of 1.5718. USD/JPY went down to 83.55 from 83.98 after it earlier jumped as high as 84.34.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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