The dollar fell against the euro and other major currency counterparts after China raised its interest-rates

Investors were in a hurry to take home profits causing the DOW , S&P and Nasdaq to fall.Tom Wirth, senior investment officer for Chemung Canal Trust Co., said: “We've had such a great run that we're seeing some profit-taking even though there's really no information out there that's taking us down. Earnings are
very strong and they're what's keeping the market higher. Without Disney and Coke today, the DOW's losses would be a lot greater."
The FTSE , DAX and the CAC slid after the Stoxx Europe 600 reached its highest level since 2008. As demand for raw materials may rise, speculations were high as to how would this demand be met after yesterday's interest-rate rise by China. Philip Lawlor, investment strategist at Smith & Williamson in London, said: “The market has good momentum but is there sufficient momentum to drive it on substantially higher? In terms of drivers, we know liquidity is the real driver -- corporate M&As, buybacks, the liquidity from QE2 spilling over."
The dollar fell against the euro and other major currency counterparts after China raised its interest-rates. The dollar however rose against the yen as Treasury yields gained after a $32 bn note sale.Mark McCormick, a New York-based currency strategist at Brown Brothers Harriman & Co, said: “Market participants have understood that China is intently trying to slow their economy down and most people feel it’s going to be a soft landing, so that supports the risk backdrop for commodity currencies over the long term. The market today is being driven by dollar weakness outside of strength of any other currency.”The pound fell against the euro, after UK Chancellor of the Exchequer George Osborne raised tax on banks. Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank in London, said: “Pound has been sold across the board after Mr. Osborne’s comments. It’s a knee- jerk reaction to the higher bank levy. The UK economy, whether you like it or not, is still heavily reliant on the financial sector,so anything that adversely affects it will be reflected in the currency.”
The Chinese government continued to take steps to curb inflation taking the Hang Seng and the Nikkei lower. Matt Riordon, Paradice Investment Management Pty., in Sydney , said: “There’s concern that if tightening continues in China, there will be a pull back on demand. Earnings have continued to surprise on the upside. The signs of an economic recovery are clearly there.”The benchmark Nikkei 225 fell 0.2
percent and the Hang Seng Index also fell 1.4 percent.
Oil fell again after China raised its interest rates, making energy,industrial metals and soybeans costlier, since China is world's biggest buyer of these. Because of this move demand for oil also reduced.Filip Petersson, an analyst at Stockholm based bank SEB AB, explained why and how will this rate hike effect China and the world: “The hike is mainly an effort to cool down the economy, which is more or less the same thing as saying that you want to cool down energy and industrial metal consumption. If you take things one step further, there is a fear that the Chinese economy could overheat and get out of control and that Chinese authorities will have to go to extreme measures to cool it down, thereby triggering a hard landing of the economy, which would have a major impact on industrial metals and energy consumption.”