Dollar mixed after Obama speech

January 28, 2010
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, LONDON, Jan 28 – The dollar traded mixed on Thursday as investors digested US President Barack Obama\’s State of Union address that focused on economic issues, notably job creation amid a fragile recovery.

The European single currency edged up to 1.4025 dollars from 1.4019 dollars late in New York on Wednesday.

Against the Japanese unit, the dollar rose to 90.38 yen from 89.94 yen late Wednesday.

Thursday\’s market focus was on a State of the Union address by Obama, who vowed to veto any finance bill that does not contain "real reform," as he moves to overhaul the country\’s banks in the wake of a massive economic crisis.

He also said that 30 billion dollars from a Wall Street bailout fund would be used to help small businesses still reeling from the financial crisis.

The speech came after the Federal Reserve gave a rosier outlook on the economy but kept its fed funds rate unchanged in a range of zero to 0.25 percent in order to nurse a still-fragile recovery.

The panel headed by Fed chairman Ben Bernanke said recent data "suggests that economic activity has continued to strengthen and that the deterioration in the labour market is abating."

It said consumer spending, the main driver of economic activity, "is expanding at a moderate rate but remains constrained by a weak labour market, modest income growth, lower housing wealth, and tight credit."

The committee reiterated that its key lending rate would be left unchanged for a prolonged period. Some analysts see no increase before 2011.

With the jobless rate still high and household incomes weak, "it\’s hard to see higher interest rates this year," said Mitsubishi UFJ Trust and Banking Corp. chief strategist Hideaki Inoue.

The euro\’s recovery meanwhile came one day after the single currency plunged to a six-month low under 1.40 dollars as most traders favoured the safe-haven greenback in the face of renewed global economic jitters, dealers said.

In London on Thursday, the euro was changing hands at 1.4025 dollars against 1.4019 dollars late on Wednesday, at 126.77 yen (126.12), 0.8625 pounds (0.8669) and 1.4736 Swiss francs (1.4721).

The dollar stood at 90.38 yen (89.94) and 1.0507 Swiss francs (1.0499).

The pound was at 1.6254 dollars (1.6168).

On the London Bullion Market, the price of gold fell to 1,091.82 dollars an ounce from 1,094.75 dollars an ounce late on Wednesday.

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