NEWS FLASH - US FED CUTS RATES 0.5%

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ingot54

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Friday, August 17, 2007 - 11:47 pm:

Just in from Bloomberg - the Fed Res cut the cash rate from 6.25% to 5.75%.

Commsec just reported on TV that world markets have turned on a dime.

FTSE 100 up 200 points.

NZDJPY up 6 cents this afternoon.

Aussie dollar up 3 cents this evening - now hitting 79.86

All major currencies have reversed trend.

All I can say is WOW!

NZDJPY

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ingot54

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Friday, August 17, 2007 - 11:48 pm:

DOW opens

UP 310 points

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hilarius

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Saturday, August 18, 2007 - 12:24 am:

THE CUT DOES NOT APPEAR TO BE TO THE MAIN FED FUNDS RATE BUT RATHER TO THE INTER-BANK DISCOUNT RATE

[Quote]
The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from regional Federal Reserve lending facilities. It differs from the key federal funds rate, which is the rate at which private institutions lend to other depository institutions overnight.

The discount window is rarely used; only an average of $87 million is borrowed on an average day, said Tony Crescenzi, chief bond market strategist for Miller Tabak & Co.

"It is imperative that the Fed validate this largely symbolic but important action with a cut in the fed funds rate," Crescenzi said.

The target for federal funds remains 5.25%. [Unquote]

Source www.marketwatch.com

(Message edited by Hilarius on August 18, 2007)

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

davkell

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Saturday, August 18, 2007 - 12:39 am:

Ingot; Without looking, ru sure $AUD up 3cents, to .79? That means it was .76..... last time I looked it had just dropped below .80?

DOW up 310pts......... bet you it's either (a) down by close of business or down seriously Monday! (If I was a gambling man!!!)

*** Ok, should have checked first. 76cents the low.... WOW! Nice drop! Anyone buy the low?

(Message edited by davkell on August 18, 2007)

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ingot54

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Saturday, August 18, 2007 - 01:27 am:

Sorry - I sounded like it was the libor (overnight cash rate). This snippet will explain more - I suggest you crawl all over bloomberg and get the gist of it.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8_CLssc9kr8&refer=home

Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch (Update1)

Aug. 17 (Bloomberg) -- The Federal Reserve unexpectedly cut its discount rate and said it's prepared to take further action to ``mitigate'' damage to the economy from the rout in global credit markets.

The central bank reduced the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent.

It's the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

MORE

It has had an instant reversal effect on currency trends worldwide.

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ingot54

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Saturday, August 18, 2007 - 01:31 am:

The cut of 0.5% may seem a lot, but I believe it is more significant in that it shows there is a will for the Fed to act - to do something to ensure "homeland security".

As you said Hilarius - symbolic.

I think by the time the word actually digests the news, it may be back to gloomy street by Wednesday. Such cynicism has been bred from the DOW's penchant for yo-yo tricks over the past year ... and explains why I don't bother with equities any more.

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ingot54

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Saturday, August 18, 2007 - 01:45 am:

Davkell

The AUD bounced off 76.73 this afternoon. Our Res Bank spent the afternoon buying the AUD to halt the slide.

Tonight it raced up to 79.86 before falling back to 78.86 as I write.

The NZDJPY had a 6 cent bottom-to-top move after the announcement, and the GBPUSD/EURUSD and other currencies experienced similar reversals.

It was fun while it lasted...

Here is a chart of the AUDUSD at time of writing ...78.90

AUDUSD

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ingot54

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Saturday, August 18, 2007 - 01:57 am:

Reserve Bank props up currency for first time in 6 years

Aug. 17 (Bloomberg) -- Australia's central bank bought the nation's currency for the first time in six years to stem the steepest drop since it was allowed to trade freely in 1983.

The global credit crunch has made financial markets ``extremely skittish,'' central bank Governor Glenn Stevens said today on Queensland's Gold Coast. ``Where market conditions are disorderly, we are prepared to intervene from time to time.''

Australia's dollar rallied as much as 1.8 percent against the U.S. currency, then fell again, extending its four-day slump to 7.4 percent as investors cut holdings in higher-yielding assets bought with money borrowed in Japan.

The Reserve Bank also added cash to the financial system...

*********************************************************************
The fastest way to prop up a currency is to:

a) Raise interest rates
b) Talk about raising rates

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Trading style: Chartist Artist _ Breakouts and Shakeouts.