Dollar tumbles as Bernanke says rate cuts may be needed

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NEW YORK, Jan 10, 2008 (AFP) – The dollar fell sharply Thursday after Federal Reserve chairman Ben Bernanke said the US central bank was ready to implement fresh interest rate cuts if necessary amid lingering economic uncertainty. Traders ratcheted up their expectations that the US central bank would unleash a fresh rate cut at a looming two-day policy meeting scheduled for January 29-30. The federal funds short-term interest rate is presently pegged at 4.25 percent.

At 2200 GMT, the euro had surged to 1.4807 dollars, up strongly from 1.4660 dollars in New York late Wednesday. The euro’s gain propelled it closer to its record high against the dollar of 1.4967 struck on November 23.

The dollar declined to 109.27 yen from 109.93 against the Japanese currency a day earlier.

“Traders are now pricing in as much as 88 percent probability of a 50-basis-point rate cut to 3.75 percent, according to short-term fed funds futures,” analysts at Forex Capital Markets said in a briefing note after Bernanke delivered a speech on the economic outlook.

“We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,” Bernanke said in Washington, adding tha