New York shares swung within a 100-point range in morning trading as Wall Street held its breath ahead of a decision by the US Federal Reserve to cut interest rates tonight.

The Dow Jones industrial average rose by as much as 80 points but also dipped by 30 points as traders waited to see whether the American central bank will cut the cost of borrowing by half a percentage point to 1 per cent. By lunch time it was trading up 76.22 points at 9,141.34.

Last night, Wall Street rose by 890 points — the second largest one-day gain on Dow Jones as confidence grew that the US Federal Reserve will cut interest rates.

The expected move sent the dollar down against sterling to $1.64 - an improvement for the pound which fell as low as $1.55 in recent days as fears of a recession in the UK sent investors piling into the greenback.

Wall Street was cheered by official statistics published by the US Commerce Department that showed American manufacturers had sold more long-lasting goods in September than Wall Street had been expecting, raising hopes that the US economy might not have slowed as sharply as thought.

Durable goods orders — manufactured products expected to last longer than 3 years — surged 0.8 per cent in September, well above expectations of a 1.2 per cent fall.

The figures also mark a significant recovery from August, when durable goods orders fell by 4.8 per cent.

Durable goods orders are a measure of the health of corporate America and today's numbers indicated that transportation orders, which includes the aviation industry, jumped 6.3 per cent, including a 3 per cent gain for autos and auto parts — the biggest jump since July 2007.

However, Ian Shepherdson, chief US economist at High Frequency Economics, expressed caution about the numbers, explaining: "The trend in core capital goods orders is still broadly flat but we are very nervous about the next few months — and 2009."

Traders in New York were awaiting an announcement from the Fed at around 2.15pm, eastern time (6.15pm in London) about interest rates.

The central bank is widely expected to cut by at least a half percentage point to 1 per cent, but some economists have refused to rule out a three quarters of a percentage point cut to 0.75 per cent. Such a large reduction would cut the cost of borrowing to its cheapest level since 1958.

Any cut is expected to be matched next week when the Bank of England and the European Central Bank gather for scheduled rate setting meetings.

Earlier today, the People’s Bank of China cut interest rates for the third time in six weeks.

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