Dollar falls as Fed slashes rates

he dollar has fallen sharply against other currencies after the US Federal Reserve slashed its key interest rate to an all-time low.

Many analysts expected a cut to 0.5%, rather than the Fed's move to 0.25%.

The dollar stood at $1.4094 against the euro, $1.5511 against the pound and 88.43 yen versus the Japanese currency.

Meanwhile sterling fell to another record low against the euro amid expectations the Bank of England may cut its interest rates further.

The US interest rate is now the lowest among developed countries.

"This clearly hadn't been priced into markets with the dollar tumbling as a result," said James Hughes, a currency analyst at CMC Markets.

'Very negative'

At the beginning of December, the Bank of England reduced its rate to 2% from 3%, and notes from its monetary policy committee showed it considered an even deeper cut.

Separately, it was reported that the number of people out of work rose to the highest level since June 1999, while those claiming unemployment beneift hit a 17-year high.

"Sterling is coming under pressure after the claimant count figures were well above market expectations," Ian Stannard at BNP Paribas in London.

"It shows the UK is moving toward recession and this is very negative for sterling".

The pound stood at 1.1003 euros after hitting a record low of 1.0980 euros in earlier trading.