Forex Market Update: U.S. Dollar Trades Broadly Higher
The U.S. dollar rose sharply against all major traded currencies on Thursday after the Federal Reserve signaled that it might start tapering its bond purchase program by the year end as the U.S. economy shows signs of improvement.
The Fed announced its policy-rate statement on Wednesday. The bank left the benchmark rate unchanged, which is at record low level; however, it said that the multi-billion dollar asset purchase program could be squeezed towards the end of this year.
The bank said that the deceleration of the economic stimulating measures will be carried in a phased manner, adding that the QE3 might be completely halted by the second half of the next year, should the macroeconomic environment continues to improve.
The U.S. dollar Index, a gauge on U.S. unit’s performance against a basket of six major traded currencies, climbed 0.7% to 82.053, which is its 10 day high level.
Meanwhile, analysts, according to Reuters said that the dollar gains could put an end to euro’s rally, probably pulling back the euro/dollar pair to 1.30 as the monetary union’s economy struggle to rebound, raising speculation over further cuts in interest rate.
“Now it feels like the market wants to add to dollar longs … The U.S. growth story is still the most convincing in G4 (the U.S. , euro zone, Japan and Britain),” said Valentin Marinov, a currency strategist at Citi, according to Reuters.
At last check, the euro fell 0.67% against the USD to trade at $1.3206 while the dollar gained 1.23% against the yen to trade at 97.64 yen.