US and Aussie dollars slip

Published: 31 Jul at 9 AM Tags: Euro, Dollar,

A policy meeting at the US Federal Reserve is expected to result in an announcement that interest rates will remain low. This has seen the dollar slide against the euro. The single currency is trading near a six-week high of $1.3289.

GDP is expected to have grown in the second quarter by around 1 per cent. This is a drop on the 1.8 per cent growth recorded during the previous three months.

The greenback has been rallying since chairman of the Fed Ben Bernanke suggested that the central bank’s easy money policy could be tapered before the end of the year. However, Mr Bernanke has since backtracked and said a policy of bond buying will remain in place unless the US economy continues to show signs of strong growth.

Low interest rates put pressure on the dollar. The strength of the euro could be short-lived if the European Central Bank also announces it will not be pushing interest rates up in the near future.

The Aussie dollar has come under pressure after the Reserve Bank of Australia suggested that interest rates could be cut. The Aussie dropped 1.2 per cent to $0.9091. If Glenn Stevens, head of the Australian central bank, does announce cuts the Aussie is likely to plunge further.