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Dollar plunges on foreign exchange

The dollar has today plunged on the currency markets after the government reduced interest rates to 0% in a bid to refloat the US economy. The move has seen the currency hit a 13 year low against the yen and fall dramatically against the euro. The US government is now focused on a policy to make borrowing as cheap as possible in order to try and encourage consumer spending which should eventually kick start the US economy.

The situation in the US is reflected in the UK where the economy is still very weak and the UK currency is under serious pressure on the foreign exchanges. The US is still the powerhouse of the worldwide economy and a substantial slowdown in this economy will have a serious impact upon many countries around the world and hold back their potential recovery.

While Gordon Brown has not resorted to 0% interest rates as yet there is every chance he could seriously consider the move as the US government has already broken the mould and pushed ahead with its own policy. There is no doubt that the next 12 months will be vital for both the US and the UK economies and if no recovery is in sight it may take many years for economic activity to pick up.

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