Dollar edges higher on rate cut speculation

New York: The dollar rose against a basket of currencies yesterday amid growing views that a sharp economic downturn in the United States could spread to other countries and prompt their central banks to cut interest rates.

These concerns appeared to be supported by data showing a sharp drop in UK home prices which pushed sterling to a record low against the euro and made it the biggest loser among major currencies.

Analysts said the dollar, which had seen some selling pressure overnight, was being supported investors' reluctance to aggressively buy the euro ahead of Thursday's European Central Bank meeting and a G7 gathering later in the week.

"We are getting a bit of dollar strength as we go forward," said Boris Schlossberg, senior currency strategist at DailyFX.com in new York.

"The focus is now shifting from weakness in the US to the possibility of the rest of the world having to begin to lower interest rates to combat a global slowdown."

Fed move

The Federal Reserve has slashed its benchmark overnight lending rate by 3 percentage points to 2.25 per cent since mid-Sep-tember, in a bid to prop up a faltering economy. That wiped out the dollar's yield advantage against currencies such as the euro.

The New York Board of Trade's dollar index, which tracks the greenback's performance against a six major currencies, climbed to a session high of 72.376. It was last trading around 72.324, up 0.1 per cent on the day.

The euro gave up earlier gains, which had pushed to it up to $1.5798 in overnight trade. It was last trading down 0.1 per cent at $1.5689.