US Dollar falls after Fed Reserve announcement

US Dollar Drops against yen and euro

The U.S. dollar dropped markedly against the yen and euro on Tuesday following the announcement by the Federal Reserve that it is preparing to further stimulate the fragile economy, increasing concerns that more dollars may be printed to help that action.

A six-week high was hit by the euro against the greenback and the euro breached its 200-day moving average for the first time since January indicating more appreciation to come. The yen meanwhile stood stronger against the dollar too, getting past the 85 mark since Japanese officials intervened to weaken their currency last week.

The Federal Reserve released a statement saying that the central bank is gearing up for more action to prevent joblessness from increasing and prices from dropping.

The statement said there will be no change in monetary policy, but the Fed did express concern about the slow economic growth and the low inflation rate compared to its last meeting held in August.

“Bottom line, the Fed may have to do more in terms of stimulus before the end of the year, and that is obviously pushing yields lower,” said Joe Manimbo, currency trader at Travelex Global Business Payments in Washington.

“In turn it makes returns on dollar-denominated assets even less atrractive,” Manimbo said.

Nick Bennenbroek, head of FX Strategy at Wells Fargo in New York said,” It seems that the U.S. economy is at that point where the Fed is actually closer to easing monetary policy. So we have seen the dollar sell off against the euro.”

Posted by James Fried on Wednesday September 22 2010, 8:19 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0