Bank of England seen edging nearer additional quantitative easing By Deborah Levine and William L. Watts, MarketWatch NEW YORK (MarketWatch) — The dollar pared gains, staying very near an all-time low versus the Japanese yen on Wednesday, as investors prepared for the conclusion of a U.S. Federal Reserve policy meeting that’s expected to see the central bank swap shorter-dated government securities for longer-dated ones in an effort to jump-start a moribund U.S. economy. Also on currency traders’ radar, minutes of the Bank of England’s September meeting show members there were considering more quantitative easing. The dollar index DXY +0.08% , which measures the U.S. unit against a basket of six currencies, rose to 77.139 from 77.089 in North American trade late Tuesday. The euro EURUSD +0.19% erased a decline in midmorning trading, to trade at $1.3704, compared to $1.3705 Tuesday. Against the Japanese yen, the dollar stayed very near its all-time low, just under 76 yen. The dollar fell to ¥76.40 USDJPY -0.08% , from ¥76.41 on Tuesday. A so-called Operation Twist by the Fed may send U.S. yields at the long end a little lower, but the front end of the yield curve, which has been a much bigger driver of forex trends, won’t get much help, said Kit Juckes, head of foreign exchange at Societe Generale. . Read about Fed getting ready to 'twist'. When the Fed has expanded its balance sheet, effectively creating money to put into the financial system and often called quantitative easing, those programs have been negative for the dollar. The Fed is expected to announce the outcome of the Federal Open Market Committee meeting at 2:15 p.m. Eastern. If something like Operation twist is announced “and there is no change to the overall size of the Fed’s balance sheet, the impact on the dollar may be slightly positive,” said Brian Dolan, chief currency strategist at Forex.com, “However, we think expectations for Operation Twist are already heavily priced-in to current levels of U.S. Treasurys and the dollar,” so some traders may reverse their positions after the plan is confirmed, which could weigh on the greenback, he said. Read more about Treasury bonds. Greece, sovereign debt But the outcome of the FOMC meeting may only briefly steal the limelight from the ongoing euro-zone debt crisis, said Steve Barrow, currency and fixed-income strategist at Standard Bank. Greek Prime Minister George Papandreou convened a cabinet meeting Wednesday after two days of conference calls between Finance Minister Evangelos Venizelos and members of the review team from the European Union and International Monetary Fund. Papandreou is expected to press for speeding up austerity measures in an effort to secure an upcoming round of aid from the EU and IMF seen as necessary to avert default as early as next month. Bank of England minutes The British pound GBPUSD -0.70% slipped to $1.5613 from $1.5727. Minutes of this month’s meeting of the Bank of England’s nine-member Monetary Policy Committee showed no members joined Adam Posen’s call to boost the central bank’s bond-buying program, but indicated that further easing could be in store in October, economists said. Read more on BOE minutes. “This is clearly a major swing in a dovish direction,” said James Knightley, economist at ING Bank, noting that it follows the central bank’s recent assessment that the £200 billion of asset purchases was equivalent to rate cuts of around 1.5 to 3 percentage points. If the Bank of England cuts its growth and inflation forecasts in November, then a Nov. 10 increase in asset purchases looks likely, he said. Sterling would likely remain under pressure, Knightley said, with the Federal Reserve likely to lag behind in offering further quantitative easing of its own. The Swiss franc also drew some attention, falling against the euro.The euro rose about 1% to 1.2277 Swiss francs EURCHF +0.89% , up from 1.2157 francs Tuesday. The euro jumped versus the Swissie early in Tuesday’s session on unconfirmed rumors the Swiss National Bank was preparing to raise the floor on the euro/Swiss franc currency pair to 1.25 francs from 1.20. The Australian dollar AUDUSD -0.66% slipped against the U.S. unit to $1.0069, down from $1.0253.

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