US Dollar Falls After Fed Meeting

Posted August 11, 2010

Investors turned to the Federal Reserve to learn more about the economy. As a result, the US dollar fell against its competitors.


During the Tuesday trading session, the US dollar fell against many of its competitors as the Federal Reserve meeting comments were made. The Federal Reserve in the United States acknowledged in its remarks that there seems to be a slowdown occurring in the US economy, and the pace of the recovery. The Fed also moved to stop the huge balance sheet it has from further shrinking. The goal of the Fed is to kick start the economy.

US Dollar

As many investors had feared, the news about the US economic slowdown in the pace of the recovery caused the US dollar to fall against many of its key competitors. Investors are concerned that the US dollar will continue to be lessened in value especially if and when the Federal Reserve offers more measures to improve the economy. To do this, it is not likely to tighten its fiscal belt and instead is likely to offer more stimulus to the country. 

It is likely that the Federal Reserve will leave key lending interest rates unchanged again, another factor that investors were hoping would change at this rating meeting. After the statement was made, the US dollar feel significantly during the day, but was still within its recent ranges. The euro, on the other hand, was unable to bounce higher against the US dollar for the day.

Canadian Dollar and Australian Dollar

It is likely that the US dollar will continue to fall against some of the world's currencies, including those that are specifically related to growth. Specifically, this includes the Australian dollar and the Canadian dollar. Both the growth prospects and the rate differentials in these countries are better than those of the United States. That will help these currencies to improve, experts say.

Japanese Yen

Also notable during the currency trading session on Tuesday was the Asian trading session's Bank of Japan. The governor of the Bank of Japan, Masaaki Shirakawa, made a statement in which he expressed some concern over the recent surge in the yen and the damage this can caused to multi month highs. Specifically, the damage this could do to the country's economy.  However, in his statement, he eased investor concerns when he stated that the bank has no intentions or plans to intervene or alter the course of the monetary policy to slow down or stop any of these gains.

By The Numbers

During the currency trading session on Tuesday, the US dollar managed to move below Y 85. Some investors believe this could lead to a slide that could move the US dollar to as low as Y 79.75, which it has not hit since 1995.

By late in the day Tuesday, the euro moved from US 41.3225 as of Monday to US $1.3187. The euro moved from Y 113.57 to Y 112.58. The US dollar moved from Y 85.84 to Y 85.35. The US dollar moved from CHF 1.0484 to CHF 1.0470. The UK pound moved from US $1.5900 to US $1.5886. The ICE Dollar Index moved the US dollar from 80.700 to 80.762.