Forex »

US dollar treads water after selloff

Finances
Share on StockTwits
Published on
www.finances.com
US dollar treads water after selloff

The US dollar held steady after hitting fresh three-month lows on the prospect of deepening federal stimulus. US dollar pairs fell sharply after the Federal Open Market Committee opted to hold off on tapering its $85 billion in monthly asset purchases, a move that surprised Wall Street. The markets watched the Fed’s balance sheet swell to more than $3.6 trillion without word as to when to expect an asset taper.

The dollar index fell more than 1 percent after Federal Reserve Chairman Ben Bernanke made his post-FOMC announcement. The dollar index was up more than 0.1 percent in the New York session, hovering around 80.39.

The greenback faced staggering losses against its North American counterpart, the loonie, sending USDCAD down toward the 1.02 handle, a three-month low. In Europe the dollar lost more than 1.5 percent against the British pound, sending GBPUSD well above the 1.61 region. The euro also shot up more than 1.5 percent to hit a new seven-month high. Both GBPUSD and EURUSD have since fallen back as a flurry of US data releases look to correct the greenback’s losses.

The Labor Department reported 309,000 jobless claims for the week ending September 13, suggesting fewer Americans are experiencing layoffs. Existing home sales shot up 1.7 percent to 5.48 million in August, according to the National Association of Realtors, beating expectations by more than 200,000. These numbers point to sustained recovery in the US economy, which could generate support for a shift in monetary policy before the end of the year.

The Fed’s reluctance to reign in record stimulus has put considerable pressure on the safe haven currency, which is facing a difficult near-term outlook. The FOMC meets just two more times this year to contemplate the fate of monetary easing.

Share on StockTwits