The dollar slipped against the euro and British pound on Friday after the U.S. Federal Reserve cut its discount rate to banks by a half percentage point. The 13-nation euro rose to $1.3475 in afternoon New York trading from $1.3405 in New York late Thursday. The British pound also edged up to $1.9798 from $1.9792. The Fed approved the cut in the discount rates in its most dramatic effort yet to restore calm to global financial markets roiled by a widening credit crisis. The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks, will be lowered to 5.75 percent, from 6.25 percent. However, the Fed did not change its target for the federal funds rate, which has remained at 5.25 percent for more than a year. That is the target rate for overnight lending between banks. By contrast, the European Central Bank and Bank of England have been raising their rates. The ECB is expected to make another increase in September. Higher interest rates, a weapon against inflation, can support a currency by offering investors better returns on investments denominated in it. Meanwhile, the dollar gained on the Japanese currency Friday, moving up to 114.00 from 113.11 yen. For most of the week, the yen benefited from concerns over the global credit squeeze. Jittery investors had unwound risky carry trades, which involve selling off the low-yielding yen in favor of higher-yielding investments. In other New York trading, the dollar bought 1.2071 Swiss francs, down from 1.2149 late Thursday, and 1.0637 Canadian dollars, down from 1.0773.
