Dollar Fell after Fed Cut Discount Rate

The dollar fell after the Federal Reserve cut the discount rate by 50 percent to 5.75 percent and said that downside risks are on the rise. The euro rose as high as 1.3550 versus the dollar, while the sterling pared its earlier loss and climbed back to above 1.98 level against the dollar.

The Fed said in the statement that it is ¡°prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.¡± The dollar rallied after the Fed cut window rates to increase liquidity in the market. The Dow Jones Industrial Average opened 300 points higher under the stimulus of the Fed¡¯s action.

Stocks pared half of its earlier gains as investors took a cautious stance and took profits before a US consumer sentiment report. The University of Michigan consumer sentiment fell from 90.4 in 83.3 in August, below the estimate of 88. The dollar edged down slightly after the below-the-expectation data.