Investing.com - The dollar flattened against the yen as
investors digested the minutes from the Federal Reserve's June
policy meeting, which revealed the U.S. central bank could close
its monthly bond-buying program in October.
In U.S. trading, USD/JPY was up 0.01% and trading at 101.59, up
from a session low of 101.45 and off a high of 101.86.
The pair was expected to test support at 101.24, the low from
June 30, and resistance at 102.27, last Thursday's high.
The greenback held onto gains after the Fed said it was on track
to closing its dollar-weakening monthly bond-buying program this
year, though concerns among monetary authorities over excessive
risk-taking in the country's financial markets took the greenback
off its highs.
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
"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
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
The Fed's words bolstered the dollar over the yen, though
concerns among monetary authorities that excessive risk-taking may
be occurring in the country financial markets took the greenback
off earlier highs.
Corporate bond spreads have been falling as have volatility
indicators such as the VIX, which could indicate that investors are
taking on risks despite the possibility of facing losses for which
they might not be fully prepared.
"Signs of increased risk-taking were viewed by some participants
as an indication that market participants were not factoring in
sufficient uncertainty about the path of the economy and monetary
policy," the minutes read.
"They agreed that the Committee should continue to carefully
monitor financial conditions and to emphasize in its communications
the dependence of its policy decisions on the evolution of the
economic outlook; it was also pointed out that, where appropriate,
supervisory measures should be applied to address excessive
risk-taking and associated financial imbalances."
Still, monetary policy will remain accommodative and will
promote "favorable financial conditions required to support the
The yen, meanwhile, was down against the euro and down against
the pound, with EUR/JPY up 0.23% at 138.59, and GBP/JPY trading up
0.14% at 174.25.
On Thursday, the U.S. is to release the weekly government report
on initial jobless claims.
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