Dollar rises after China raises interest rates

NEW YORK - The US dollar was boosted on Tuesday after China’s announcement it will raise key interest rates sent investors fleeing to what is considered a safe currency.

By (AFP)

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Published: Wed 20 Oct 2010, 9:52 AM

Last updated: Thu 2 Apr 2015, 9:48 AM

The euro was changing hands at 1.3726 dollars around 2100 GMT, down from 1.3942 dollars late Monday.

The dollar also rose against the Japanese currency, to 81.54 yen from 81.21 yen on Monday.

China’s central bank said it would raise its benchmark one-year lending and deposit rates by 25 basis points each, as Beijing ramps up efforts to contain inflation and soaring property prices.

The first interest rate hike in nearly three years, to take effect Wednesday, came ahead of key data this week that is expected to show growth in the world’s second-largest economy continued to slow in the third quarter.

“The hike by the Chinese central bank triggered some risk aversion,” said analyst Jessica Hoversen of MF Global.

“The tightening of policy suggests you are removing some liquidity off the system, it also makes people concerned about what is going to do to the Chinese economy.”

At the same time, investors remained focused on the US Federal Reserve’s expected new asset-purchasing spree to boost the flagging US economic recovery, which has driven the US dollar down in recent weeks.

In late New York trade, the British pound was fetching 1.5704 dollars, down from 1.5878 on Monday.

The dollar rose to 0.9711 Swiss francs from 0.9587.

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