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US Dollar Strengthens on Fed Taper Plans

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US Dollar Strengthens on Fed Taper Plans

The US dollar strengthened Thursday, as forex traders bid up the greenback in anticipation of further stimulus cuts in February.
The Federal Open Market Committee announced yesterday it plans to reduce liquidity in the financial markets by another $10 billion, underscoring the central bank’s confidence in economic recovery. Although deflationary pressures still persist, consumer spending and business investment continue to drive expansion in the world’s largest economy. US gross domestic product expanded at an annual rate of 3.2 percent last quarter, the Commerce Department reported today in an advance estimate.

The US dollar index rose more than 0.7 percent to 81.07. Gains were broad-based on Thursday, as investors downplayed weak pending home sales data courtesy of the National Association of Realtors, a US trade group.

The EURUSD pair fell more than 100 pips to 1.3551. The euro lost ground in the European session after consumer inflation in Germany eased to 1.2 percent annually. The European Commission will close out the week with reports on Eurozone unemployment and consumer inflation.

Elsewhere in Europe, the British pound was unable to rally on strong mortgage approval data, courtesy of the Bank of England. The GBPUSD pair fell 80 pips to 1.6478.

The USDCAD peaked at 1.12 today, as an idle Canadian dollar failed to make headway. The pair consolidated at 1.1172 in North America’s afternoon session. Statistics Canada will report on November gross domestic product Friday.

The USDJPY pair rose more than 0.6 percent to 102.72. Japan’s Statistics Bureau will report on consumer inflation Friday.

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