Currencies

Financial market issues appear far from finished and this implies further weakness in the US dollar but the speed of recent falls means a short-term bounce is possible.

Deleveraging of commodity positions saw a major sell off across the spectrum as Merrills gets the wobbles and nips financials in the bud. The Dow closed down 293.

A Fed rate cut of only 75bps was still enough to add impetus to a rally started when Goldman and Lehman beat the Street. The Dow jumped 420 points.

As the Fed steps up its financial market rescue, expectations are increasing that the G7 will be forced to intervene to save the US dollar.

A 21 point rise in the Dow belied another rollercoaster session in which traders tried to decide whether Bear Stearns could have signalled a bottom. The commodities bubble popped in a dash for cash.

The temporary bail-out of distressed US investment bank Bear Stearns poses all sorts of problems of its own.

There were two casualties of war on Wall Street on Friday – the truth, and Bear Stearns. Dow down 194. Gold over US$1001/oz.

It was down, up, and down again on Wall Street to only a small rise while the numbers 111 and 1000 made their debuts.

Has the latest Fed move solved anything?

While interest rate differentials have supported Aussie dollar gains against the greenback, CIBC notes cuts are starting to be priced in and this suggests downside risk for the currency.