Dollar firms on Fed tapering move, Yellen comments


Shutterstock photo - - The dollar shot up against most major currencies on Wednesday after the Federal Reserve cut its monthly bond-buying program to $55 billion from $65 billion, while comments from Janet Yellen suggesting a possible timetable as to when rates may rise spooked markets and sent investors chasing safe-haven greenback positions.

Fed bond purchases spur recovery by suppressing interest rates, weakening the dollar in the process.

In U.S. trading on Wednesday, EUR/USD was down 0.75% at 1.3829.

The Fed earlier said it was leaving interest rates unchanged and reduced the amount of bonds it buys in the open market each month to $55 billion from $65 billion, both moves in line with expectations.

The news sent the greenback rising, as the Fed's asset-purchasing program, which kicked off in 2012 at $85 billion a month, has suppressed long-term interest rates for over a year, sending investors to assets like stocks with the hope investing and hiring ensues.

Elsewhere, the Fed omitted previous language calling for rate hikes if the unemployment rate approaches a 6.5% threshold, a policy tool known as forward guidance.

Even though the economy is improving, a highly accommodative monetary policy stance remains appropriate, the U.S. central bank said.

The dollar shot up, however, after Fed Chair Janet Yellen suggested at a press conference that interest rates could rise six months after the bond-buying program ends, which sparked a selloff in equities markets and fueled demand for the dollar.

The dollar was down against the yen, with USD/JPY up 1.08% at 102.53, and up against the Swiss franc, with USD/CHF up 0.86% at 0.8806.

The greenback was up against the pound, with GBP/USD down 0.30% at 1.6542.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.99% at 1.1246, AUD/USD down 0.92% at 0.9040 and NZD/USD down 0.73% at 0.8557.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.76% at 80.12.

On Thursday, the U.S. is to publish the weekly report on initial jobless claims, as well as data on existing home sales and manufacturing activity in the Philadelphia region. offers an extensive set of professional tools for the financial markets.
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This article appears in: Investing Forex and Currencies
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