Dollar recovers as markets look past Fed decision
Thursday, March 18th, 2010channelnewsasia.com – Boris Schlossberg
Dollar recovers as markets look past Fed decision
NEW YORK – The dollar traded mostly higher Wednesday, regaining its footing a day after a Federal Reserve decision to keep interest rates at near-zero levels.
The euro fetched 1.3735 dollars in New York at 2200 GMT Wednesday, down from 1.3774 late Tuesday. It had climbed to 1.3818 dollars in early trading, its highest level since early February.
The dollar was also up at 90.33 yen from 90.28 Tuesday.
The euro initially climbed against the greenback as investors moved to the slightly higher yielding currency after the Fed maintained its benchmark rate at virtually zero percent but the single European unit fell back amid renewed concerns over the Greek debt crisis, analysts said.
The Fed’s "insistence on maintaining a dovish stance knocked wind out of the dollar bulls who had been hoping for a move to a more neutral posture given the improvement in the US economy," said Boris Schlossberg, director of currency research at Global Forex Trading.
"However, it is now clear that the Fed will not even consider the possibility of tightening until it sees tangible proof of sustainable job growth, preferring for the time being to err on the side of caution," he said.
After a one-day meeting Tuesday, the Fed’s policy body voted 9-1 to keep the federal funds rate — at which banks charge each other for loans — at a zero to 0.25 percent range.
The Federal Open Market Committee (FOMC) expected to hold the "exceptionally low" rate "for an extended period" — reiterating its standard guidance since it slashed rates to record lows in December 2008 in a bid to jolt the world’s largest economy from its worst recession in decades.
The euro came under pressure amid persistent market concerns over the lack of details from a EU plan to make emergency loans available to Greece — if needed — to shield the country from bankruptcy.
The absence of details prompted Greece to keep open the option of reaching out to the International Monetary Fund, and its mountain of debt remains a big concern, analysts said.
