The U.S. central bank cut the discount rate on Friday in a surprise move that sparked a wave of buying by global investors relieved that a financial crisis stemming from subprime mortgage failures may have been averted.
European stocks shot into positive territory and prices surged after U.S. stock market opened as investors perceived the U.S. Federal Reserve would not neglect its role as lender of last resort amid a global tightening of credit.
"That's the right support for the market. This is an important message. The central bank is signalling that it is standing by to lend support," said Max Holzer, head of portfolio management at Union Investment in Frankfurt, Germany.
The Fed, in slashing the rate at which it lends directly to banks to 5.75 percent from 6.25 percent, noted that tighter credit conditions and increased uncertainty "have the potential to restrain economic growth going forward."
A group of major U.S. and some foreign banks, the Clearing House Association, said it endorsed the Fed's action as a step that could improve credit market conditions.
The dollar fell broadly on Friday after the Federal Reserve slashed its discount rate on loans to banks and said U.S. economic growth could slow in light of tightening credit markets.
The dollar started to pull back from a seven-week high against a basket of major currencies on Thursday after investors sought safe-haven bids in low-interest currencies and U.S. Treasuries in the midst of a global equities weakness.
n late afternoon trades, the euro was 0.5 percent higher at $1.3485, on pace for the biggest gain in a month.
The dollar index (DXY), which tracks the dollar's performance versus a basket of currencies, was down 0.44 percent to 81.371, after reaching a seven-week high early Thursday of 82.132.
Against the yen, the dollar was nearly flat at 114.28 yen, while the euro climbed 0.42 percent to 153.99 yen.
Currency fluctuations have not been nearly as volatitle as it has been this summer. Investors can consider arbitraging currecies, along with equity plays.
European stocks shot into positive territory and prices surged after U.S. stock market opened as investors perceived the U.S. Federal Reserve would not neglect its role as lender of last resort amid a global tightening of credit.
"That's the right support for the market. This is an important message. The central bank is signalling that it is standing by to lend support," said Max Holzer, head of portfolio management at Union Investment in Frankfurt, Germany.
The Fed, in slashing the rate at which it lends directly to banks to 5.75 percent from 6.25 percent, noted that tighter credit conditions and increased uncertainty "have the potential to restrain economic growth going forward."
A group of major U.S. and some foreign banks, the Clearing House Association, said it endorsed the Fed's action as a step that could improve credit market conditions.
The dollar fell broadly on Friday after the Federal Reserve slashed its discount rate on loans to banks and said U.S. economic growth could slow in light of tightening credit markets.
The dollar started to pull back from a seven-week high against a basket of major currencies on Thursday after investors sought safe-haven bids in low-interest currencies and U.S. Treasuries in the midst of a global equities weakness.
n late afternoon trades, the euro was 0.5 percent higher at $1.3485, on pace for the biggest gain in a month.
The dollar index (DXY), which tracks the dollar's performance versus a basket of currencies, was down 0.44 percent to 81.371, after reaching a seven-week high early Thursday of 82.132.
Against the yen, the dollar was nearly flat at 114.28 yen, while the euro climbed 0.42 percent to 153.99 yen.
Currency fluctuations have not been nearly as volatitle as it has been this summer. Investors can consider arbitraging currecies, along with equity plays.
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