Dollar mixed on Europe interest rate decisions

[Turborama]

Source: AP


By ERIN CONROY , 02.05.09, 12:02 PM EST

The dollar was mixed against major currencies in early trading Thursday after the European Central Bank kept its key interest rate steady and the Bank of England cut its rate to a record low, both moves in line with expectations.

The 16-nation euro bought $1.2789 in early New York trading, down from $1.2856 late Wednesday. The British pound jumped to $1.4631 from $1.4461, while the dollar edged up to 89.85 Japanese yen from 89.54.

The widely expected decisions by both banks marked their decidedly different approaches to the global economic woes that have sent financial markets plunging and led to thousands of layoffs, a reduction in worker hours and factory shutdowns across Europe.

The European Central Bank left its benchmark at 2 percent while the Bank of England cut by a half-point to a record low 1 percent as it tries to get the ailing British economy back on track. Since October, when the financial crisis sharpened, the European Central Bank has cut its benchmark rate from 4.25 percent, while the Bank of England has slashed its from 5 percent.

Lower interest rates often drive investors from a currency as they move funds to where they earn better returns.

Read more: http://www.forbes.com/feeds/ap/2009/02/05/ap6013486.html