Confidence in dollar sags in wake of Fed rate cut

0 Comments | AFP, September, 2007

WASHINGTON (AFP) — The dollar's weakness and the euro's rise to record highs have raised questions about confidence in the US currency following a surprising Federal Reserve half-point rate cut, analysts say.

Some are concerned that the dollar's woes may prompt central banks to cash in their greenbacks, provoking a further downward spiral for the world's largest reserve currency.

The Fed's surprisingly large half-point cut in the federal funds rate to 4.75 percent Tuesday prompted some expected selling of the dollar. But it also caused unexpected weakness on the bond market by heightening fears about inflation. Gold meanwhile surged in another sign of concern about the US currency.

The euro has moved above 1.40 dollars for the first time and some analysts...