By Rika Otsuka
TOKYO, Jan 31 (Reuters) - The dollar hit an all-time low
versus the Swiss franc on Thursday after the Federal Reserve cut
interest rates and warned more may be needed to shore up the
weakening U.S. economy.
The U.S. currency also struggled versus the yen after the Fed
slashed the benchmark fed funds rate a half percentage point to
3.00 percent, following last week's hefty three-quarter
percentage point rate cut.
The Fed's latest easing came on the heels of data showing
that the world's biggest economy grew 2.2 percent for all of
2007, its weakest expansion in five years.
"People remain bearish about the dollar as data painted a
gloomy picture of the U.S. economy, while the Fed is likely to
lower interest rates again," said a trader at a Japanese bank.
A Reuters poll showed 15 out of 16 primary dealers on Wall
Street surveyed after Wednesday's rate cut expect the central
bank to trim interest rates again at its next meeting in March.
[]
Some Asian stock markets recovered earlier losses to trade
higher on the day but investors remained wary of taking big
risks, even as the Nikkei stock average <> rallied 1.7
percent.
The dollar hit an all-time low against the Swiss franc at
1.0814 francs <CHF=> on electronic trading platform EBS in early
Asian trade before recovering to 1.0840 francs.
The dollar dipped as low as 106.03 yen, before recovering to
106.50 yen <JPY=>, little changed from late New York trade. The
dollar tumbled against the low-yielding yen on Wednesday after
U.S. stocks slid on renewed credit crunch fears. []
Overall weakness in share prices has prompted market
participants to unwind risky positions such as carry trades, in
which the low-yielding yen and Swiss franc are used to finance
purchases of higher-yielding assets elsewhere.
Stock moves have been a major driver for currencies, as
investors see share markets as a barometer for risk.
Fitch Ratings on Wednesday downgraded the credit ratings for
Financial Guaranty Insurance Company's (FGIC) main bond insurer
unit, stoking worries about big losses at financial firms.
But jitters over such losses were soothed a little after MBIA
Inc <MBI.N> said late on Wednesday private-equity firm Warburg
Pincus completed a $500 million investment in the bond insurer,
which has been hurt by the spiralling subprime mortgage crisis.
The euro was little changed at $1.4870 <EUR=>, recovering
from a slide to around $1.4815. It was barely moved at 158.30 yen
<EURJPY=R>, clawing back from an earlier drop to 157.25 yen.
Risk aversion knocked currencies with the highest yields
like the Australian <AUD=D4> and New Zealand <NZD=D4> dollars
around 0.7 percent lower against the U.S. dollar, while they both
slid around 0.6 percent lower versus the yen.
JOBS DATA AHEAD
The Fed's cumulative 1.25 percentage point rate cut in less
than two weeks ranks among the most abrupt rate-cutting sprees in
modern Fed history, and leaves U.S. rates the lowest among
developed countries except Japan and Switzerland.
Despite expectations for additional rate easing that would
further erode the dollar's yield appeal for investors, dealers
were careful about selling the U.S. currency too aggressively
ahead of a monthly employment report on Friday.
Data on Wednesday showed U.S. private employers added more
jobs than expected in January, prompting some analysts to raise
their forecasts for the U.S. government's jobs report.
Traders said some short-term speculators booked profits on
the previous day's rally in the yen and euro against the dollar
as they were afraid that better-than-expected numbers could spark
dollar buying.
"Few market players are willing to take fresh positions as a
clear trend for the dollar is unlikely to emerge until the
employment report is out," said Hiroshi Yoshida, a forex trader
at Shinkin Central Bank.
Economists expect the U.S. economy to have added 63,000 jobs
in January after creating only 18,000 jobs in December. []
(Additional reporting by Takeshi Yoshiike)
