MW: Dollar slips in choppy moves after Fed decision
Japanese yen pares gains as Treasury yields rise
By Deborah Levine and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar stayed down for a third session Thursday, in volatile action after the Federal Reserve announced a new bond-purchase program and that rates would remain low into 2015.
The ICE dollar index DXY -0.11% , which measures the U.S. unit against a basket of six currencies, fell to 79.583 from 79.686 before the statement and from 79.728 in late North American trading on Wednesday. It had briefly turned higher after the Fed decision.
The euro EURUSD +0.2327% edged up to $1.2917, holding small gains from $1.2894 Wednesday.
Limiting the dollar’s decline, the greenback pared losses against the Japanese yen. The currency pair tends to be closely correlated to U.S. bond yields, which turned up after the Fed’s decision. Read more on Treasury bonds.
Against the Japanese currency USDJPY -0.3682% , the dollar bought ÂĄ77.58, paring a loss but down from ÂĄ77.87 Wednesday.
In a statement, the Federal Open Market Committee said it would buy $40 billion in mortgage-related bonds each month in an effort to ease financial conditions and boost growth. Read story on Fed’s decision.
The Fed also kept in place Operation Twist, under which it sells short-dated Treasury notes and reinvests the proceeds in longer-term securities. Read blog on what Fed was expected to do.
And the Fed says it intends to keep the benchmark short-term interest rate – the federal funds rate -- at nearly zero until mid-2015. The prior guidance on the first rate hike had been late-2014.
At 2 p.m. Eastern time, the U.S. central bank will release its updated economic projects. After that, Fed Chairman Ben Bernanke will hold a news conference.
Prospects for additional stimulus, particularly quantitative easing, are seen as potentially negative for the currency. Quantitative easing, or QE, relies on electronically expanding reserves, which are used to purchase assets. Read more about the Fed.
Netherlands, Switzerland
Besides expectations for the Fed, the euro has benefited from more signs of political will among Europe’s leaders to keep the euro zone together.
Dutch elections on Wednesday saw the country’s pro-European centrist parties emerge on top, setting the stage for a likely coalition. Read commentary on Dutch vote. .
On Wednesday, the dollar fell to its lowest level against the euro in nearly five months on Wednesday, pressured after Germany’s Federal Constitutional Court cleared the way for Berlin to fund its share of any future bailouts needed by other euro-zone countries. Read more on dollar, Germany.
Meanwhile, the Swiss National Bank left its minimum exchange rate for the currency pair at CHF1.20 and vowed to continue to defend the floor, including making unlimited currency purchases if needed. Read about euro, Swiss floor .
The euro also changed hands at 1.2132 Swiss francs EURCHF +0.3589% , a gain of 0.3%.
The British pound GBPUSD +0.1002% traded at $1.6113 from $1.6105 Wednesday. The Australian dollar AUDUSD +0.2635% slipped to $1.0491, down from $1.0463.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Sarah Turner in Sydney contributed to this report.
