Dollar dips as investors go long on stocks in wake of Fed minutes

By
A A A

Investing.com -

Investing.com - The dollar traded largely lower as investors opted to go long on stocks after the Federal Reserve confirmed market expectations for monetary stimulus programs to end this year, likely in October.

In U.S. trading on Wednesday, EUR/USD was up 0.25% at 1.3645.

The Federal Reserve said in the minutes of its monetary policy meeting earlier that it should end its monthly bond-buying program by the end of this year, likely in October, which sent investors chasing stocks on sentiments that the economy is recovering.

The Fed is currently buying $35 billion in Treasury and mortgage debt a month to spur recovery, a monetary policy tool known as quantitative easing that aims to stimulate the economy by suppressing long-term interest rates.

The stimulus program aims to entice investors out of safe-haven asset classes like the U.S. dollar and into equities with the hope investing and hiring follow.

The Fed has gradually been trimming the amount of bonds it purchases by $10 billion a month, and by end of this year, the program should close if the Fed continues to taper on its current trajectory.

"While the current asset purchase program is not on a preset course, participants generally agreed that if the economy evolved as they anticipated, the program would likely be completed later this year," the minutes read.

"Some committee members had been asked by members of the public whether, if tapering in the pace of purchases continues as expected, the final reduction would come in a single $15 billion per month reduction or in a $10 billion reduction followed by a $5 billion reduction."

Expect that final cut to come in October if recovery continues at its current pace.

"Participants generally agreed that if incoming information continued to support its expectation of improvement in labor market conditions and a return of inflation toward its longer-run objective, it would be appropriate to complete asset purchases with a $15 billion reduction in the pace of purchases in order to avoid having the small, remaining level of purchases receive undue focus among investors," the minutes read.

"If the economy progresses about as the Committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting."

Upon digesting The Fed's words, stocks rose on sentiments that the Fed will also keep interest rates low for some time after it concludes its bond-buying program.

The dollar was flat against the yen, with USD/JPY unchanged at 101.58, and down against the Swiss franc, with USD/CHF down 0.24% at 0.8908.

The greenback was down against the pound, with GBP/USD up 0.15% at 1.7156.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.25% at 1.0651, AUD/USD up 0.19% at 0.9418 and NZD/USD up 0.41% at 0.8824.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.22% at 80.05.

On Thursday, the U.S. is to release the weekly government report on initial jobless claims.

Investing.com
Investing.com offers an extensive set of professional tools for the financial markets.
Read more News on Investing.com and download the new Investing.com Stocks & Forex App for Android!



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Forex and Currencies

Referenced Stocks:

Investing.com

Investing.com

More from Investing.com:

Related Videos

Stocks

Referenced

Most Active by Volume

183,639,073
  • $42.32 ▲ 3.85%
82,623,623
  • $15.99 ▼ 22.79%
39,547,942
  • $119 ▲ 1.19%
32,107,751
  • $77.62 ▲ 2.63%
29,684,848
  • $10.60 ▲ 2.02%
27,615,309
  • $24.03 ▲ 0.38%
26,917,669
  • $31.10 ▲ 2.07%
26,464,306
  • $47.75 ▲ 0.59%
As of 11/26/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com