Coordinated Intervention Fails to Quell Fears
by Korman Tam
In a coordinated effort to stem the global financial crisis, the Federal Reserve along with the ECB, BoE, BoC, SNB and several other central banks slashed their key interest rates by 50 basis points. The joint statement by the central banks said, "the recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability". Accordingly, the statement said that "some easing of global monetary conditions is therefore warranted". The unprecedented move underscores the dire predicament facing the global economy and the need for urgent coordinated action in order to stem further tightening in the credit markets and halt the rapid deterioration in confidence.
Heightened risk aversion continues to benefit the yen, propping the Japanese currency to its highest level in 3-years against the euro near the 135-level while surging to a near 7-year high versus the pound beneath the 171-handle. The greenback has also firmed against the euro and sterling, remaining buoyed near a one-year high versus the euro beneath the 1.36-level and its highest level since January 2006 against the pound under the 1.72-handle. Given the lingering uncertainty and burgeoning fears for a global economic recession, the yen will continue to be the safe haven currency of choice among traders.
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