Dollar Tumbles On Fed Inaction

Wed., May 21, 1997

The dollar sank against most other major currencies Tuesday amid disappointment that the Federal Reserve left U.S. interest rates unchanged and may not act again this year.

Many traders expected the Fed’s policy-making committee to boost the federal funds rate a quarter percentage point as a pre-emptive strike against inflationary pressure in the economy.

“By the lack of action, many traders believe that we may not be looking for any further support from the U.S. side,” said David Gilmore, partner at Foreign Exchange Analytics. “Instead, we may be seeing higher rates in Europe and Japan.”

Higher rates tend to make assets denominated in dollars more valuable.

Exchange Currency in Dollars Dollar in foreign currency Canada .7319 1.3664 France .1764 5.6675 Germany .5944 1.6823 Great Britain 1.6570 .6035 Italy .000604 1656.00 Japan .008846 113.04 Mexico .126968 7.8760

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Dollar Tumbles On Fed Inaction

Jesse Tinsley

Jim Meehan

Molly Quinn

Rob Curley

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