Posted November 05, 2010
US dollar down after Fed meeting. Investors not surprised by meeting.
The US dollar fell during the course of the trading day on Wednesday in part due to the Federal Reserve's announcement of the steps it will take to boost the US economy. The US dollar, which was heading higher during the day, turned lower against most of its major competitors after the quantitative easing measures were explained by the US Federal Reserve.
The Federal Reserve announced that it would buy up some $600 billion in long term Treasury bonds. This will occur through the end of June 2011. The goal is to use quantitative easing to help sustain the economic recovery occurring in the United States which many experts believe needs further support. Experts warn that while this may help to boost the economy, it is likely to cut into the US dollar's value considerably. Prior to the announcement by the Fed, the US dollar had improved on the day against most of its rivals as positive data rolled out.
The US Dollar Index moved the US dollar from 76.735 which it was at in early afternoon trading to 76.347 after the meeting. In late North American trading on Tuesday, the US Dollar Index positioned the US dollar at 76.719.
The euro moved from US $1.4036 late in the day on Tuesday to US $1.4099 just ahead of the meeting announcement but ended the day at US $1.4132. One of the factors that caused an initial concern in the euro was information that showed that Ireland's debt troubles could be worsening or worse than expected. Some investors are concerned that the country will default on that debt.
In the last two months, the US dollar has fallen significantly against the euro as the concern about the type of move the Fed would make continued to weigh on investor's minds. At the end of August, the US dollar was at US $1.28 against the euro.
Also notable during the trading session on Wednesday was the movement of the Australian dollar. It improved on the day to trade at US $1.005.
The UK pound held on to the gains it made against the US dollar during trading. It moved from US $1.6025 to US $1.6096 during the day.
The Japanese yen also moved during the day, but not as other currencies did. Rather, the US dollar improved on the Japanese yen during the trading session. It moved from Y 80.70 last on Tuesday to Y 81.12 by the end of trading on Wednesday.