Dollar slides against euro

The dollar slipped against the euro on Friday after the U.S. Federal Reserve cut its discount rate to banks by a half percentage point.

Photo: Dollar slides against euro

The 13-nation euro rose as high as US$1.3523 before slipping back to US$1.3494 in afternoon European trading - still well above the US$1.3405 it bought in New York late Thursday.

The British pound was up to US$1.9871 from US$1.9792.

The Fed approved the cut in the discount rates in its most dramatic effort yet to restore calm to global financial markets roiled by a widening credit crisis.

The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent. However, the Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.

By contrast, the European Central Bank and Bank of England have been raising their rates. The ECB is expected to make another increase in September.

Higher interest rates, a weapon against inflation, can support a currency by offering investors better returns on investments denominated in it.

The dollar was higher against the Japanese currency Friday, moving up to 114.14 from 113.11 yen.