Drop in bank profits pressures dollar
HSBC earnings slide prompts fears of more writedowns in financial sector; investors await Fed decision later this week.
NEW YORK (CNNMoney.com) -- The dollar fell against the euro Monday as investors digested news of a large drop in profits at British bank HSBC.
The euro bought $1.5572 late Monday, up from $1.5566 late Friday. The dollar gained against the yen to ¥108.22 late Monday from ¥107.70 late Friday.
News of profit drops at HSBC put pressure on the dollar this morning, according to Kevin Chau, a foreign currency analyst with IDEAGlobal.
"The dollar weakened on the back of more fears of more writedowns at the banks, especially when HSBC made more announcements of more writedowns," he said.
The important news for investors comes later this week when central banks in the United States and Europe are expected to leave rates unchanged. The Federal Reserve makes its decision on Tuesday and the Bank of England and the European Central Bank come out with their news on Thursday.
In the meantime, the dollar is expected to trade within a narrow range relative to the euro and the yen.
"For the dollar, the bigger picture is what the banks will do and whether they'll be more worried about inflation or growth," Chau said.
The U.S. central bank cut its key fed funds rate seven times between last September and this April in an effort to keep the economy from weakening significantly in the wake of the housing slowdown and a credit crisis rattling Wall Street and Main Street.
The fed funds rate is an overnight bank lending rate that helps determine how much consumers pay for many types of loans as well as the prime rate used to peg the rates paid on certain business loans.
The Fed left the rate unchanged at 2% at its last meeting in June.
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