What do they mean by cutting basis points, And how much of an impact is it on currency?
thanks 
A basis point is 1/100th of a percentage point - .01%. So when you hear thereās been a 50 basis point cut, that 1/2%. Basis points are almost exclusively used in terms of interest rates.
A basis point is the smallest measure used in quoting yields on fixed income products. You will also hear basis points mentioned when the financial media releases reports on interest rates. The important thing to understand is that one basis point is equal to one one-hundredth of one percentage point (0.01%). Therefore, 100 basis points would be equivalent to one full percent.
For example: An interest rate of 5% is 50 basis points greater than an interest rate of 4.5%. Meanwhile, the difference between 12.83% and 12.88% is five basis points. When you read a headline such as āThe Federal Reserve cut interest rates by 25 basis points,ā this means that Fed lowered rates by 0.25%.
A rising trend in interest rates has a positive effect on the nationās currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best ārisk-freeā return on their money, which can dramatically increases demand for the nationās currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down.
Thank you very much guys for taking the time to explain itā¦ That helps me alot.
thanks