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Dollar rises as U.S. rate cut talk cheers stocks Toni Vorobyova The dollar rose broadly on Thursday as investors bet that the likelihood of more U.S. interest rate cuts will help avoid a recession and attract more dollar-positive inflows into the U.S. equity market. Traders said moves were exaggerated by low liquidity, with some currency investors -- especially those who are in profit for 2007 so far -- showing reluctance to take new positions. Expectations of a Federal Reserve rate cut next month and of more to come in 2008 got a boost on Wednesday after Fed Vice Chairman Donald Kohn said that renewed financial market turmoil could slow the U.S. economy more abruptly than thought. The dollar sold off in the immediate aftermath of the comments, but subsequently markets took the view that lower U.S. rates might not necessarily be a bad thing for the currency, especially if they boost equity markets.
The Dow Jones industrial average (.DJI: Quote, Profile, Research) posted its biggest percentage gain in nearly five years on Wednesday, with foreigners snapping up dollars in order to invest. "I think the market will move towards another 50 basis points (cut) but counter-intuitively that's probably helped (the dollar)," said Adam Myers, market strategist at Credit Suisse.
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