US Dollar Weaker on Fed Hints

Posted October 15, 2010

Fed sends messages it could be easing. Some investors believe dollar could drop two percent.


US Dollar

During the trading session on Wednesday, the Federal Reserve was at the front and center of the currency markets. The Federal Reserve policy makers seemed ready to put in place a money creating stimulus program. That news pushed the US dollar lower against its rival euro. In addition to this, the UK pound and other competitors of the US dollar also improved against the US dollar.

The Fed has said that instead of announcing one large amount of Treasurys, that it will purchase Treasurys over the long term. It will likely do the same as it did during the credit crisis. It is more likely, investors say, that the Federal Reserve will buy a limited number of bonds in the month following some type of indicator that the funds were needed.

The euro did manage to move ahead to the psychological level of US $1.40 but did not hold on to that gain. That high, though, is the highest since January. 

The US Dollar Index moved the US dollar down during the trading session. It feel from 77.375 as of late Tuesday in New York trading to 76.972 by the end of the day Wednesday. During intraday trading, it managed to fall to 76.972.

Also notable is that some investors believe that the US dollar could fall as much as two percent before it hits its bottom. This is due to the fact that the US dollar may be extremely oversold. However, the Federal Reserve is moving away from other central banks and that could push the US dollar lower.


The euro moved up from US $1.3910 as of late Tuesday to US $1.3967 for the day. The euro moved to a session high of US $1.4002 during the Asian trading session. That boost for the euro came after the German Bundesbank President Axel Weber made late Tuesday. In his remarks, Weber commented that the European Central Bank's bond purchasing plan should be phased out permanently. This plan for the euro zone bought some 63 billion euros, the equivalent to US $8 billion worth of bonds from euro zone governments. 

UK Pound

Also up against the US dollar was the UK pound. The UK pound moved from US $1.5784 as of late Tuesday to US $1.5897 for the day. 


Against the Japanese yen, the US dollar managed to move from Y 81.90 in late trading in North America on Tuesday to Y 81.81 for the day Wednesday.