Dollar Holds Two-Day Drop as Fed Seen Keeping Record-Low Rates


Forex Trading Floors Academy in Brentwood bring up to date news today on the Dollar.

The dollar held a two-day decline against the euro on bets U.S. policy makers meeting this week will say they intend to keep interest rates at a record low for an extended period even as they end bond buying.

A gauge of the U.S. currency headed for its first monthly drop since June as traders cut the probability the central bank will raise borrowing costs by October 2015 to a 49 percent chance from 85 percent odds at the end of last month. The Fed starts a two-day meeting today. The yen fell against all except three of its 16 major peers before the Bank of Japan sets policy this week with some economists predicting an expansion of monetary stimulus. Indonesia’s rupiah weakened.

“The key is going to be the tone of the Fed’s statement, and I think the tone will be extremely cautious,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “In the near term, the dollar is going to be heavy.”

The dollar was little changed at $1.2707 per euro as of 7:09 a.m. in London after declining 0.4 percent in the previous two days. The U.S. currency was little changed at 107.84 yen after touching 108.38 yesterday, the most since Oct. 8. The yen was little changed at 137.01 per euro.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, was little changed at 1,066.12. It has dropped 0.4 percent in October.

The Federal Open Market Committee indicated at its September meeting that it planned to end its bond-purchase program this month. Policy makers have kept their key interest rate at zero to 0.25 percent since December 2008.

Market’s ‘Reluctant’

“Markets are reluctant to strengthen the dollar” before the Fed’s decision, analysts at ANZ Bank New Zealand Ltd., including Auckland-based senior currency strategist Sam Tuck, wrote today in a note to clients.

The dollar has strengthened 5.9 percent in the past three months, the best performer of 10 developed-nation currencies tracked by Bloomberg correlation-Weighted Indexes, amid speculation an improving U.S. economy will eventually lead to higher interest rates. The yen fell 0.7 percent and the euro depreciated 0.5 percent.

The yen approached a two-week low versus the euro after Bank of Japan Governor Haruhiko Kuroda said today in parliament that the central bank will keep stimulus until inflation is stable at 2 percent.

The BOJ will expand asset purchases when it announces its decision on Oct. 31, according to three of 32 economists surveyed by Bloomberg from Oct. 20-27. Nineteen forecast more easing at a later date, while 10 don’t foresee any expansion.

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