Dollar falls across board after Fed move
The dollar dropped further against other major currencies on Thursday but less sharply than a day before when the Federal Reserve said it would pump more than a trillion dollars into the financial system. In London trade, the euro rose to 1.3512 dollars from 1.3509 dollars late in New York on Wednesday.
Against the Japanese currency, the dollar fell to 95.74 yen from 96.03 yen on Wednesday. The US Fed’s decision to buy long-term Treasury bonds and mortgage securities made US assets less attractive to investors, dealers said.
“The surprise announcement prompted investors to sell the dollar immediately,” said Masato Otsubo, a dealer at Resona Bank. The dollar lost more than three percent of its value against the euro Wednesday, hitting a two-month low, while falling more than two percent versus the yen.
The Fed said it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months and boost its purchases of mortgage securities by 750 billion dollars in an effort to revive the ailing economy. This is an extraordinary shift in intent that will give risk appetite a shot in the arm and send the US dollar reeling at the same time,” Standard Chartered analysts predicted.
The Fed’s efforts to get more money into circulation prompted investors to rethink their view of the greenback as a relatively safe bet. “Fears that the US will print money and debase the currency is leading to a questioning of the dollar as a safe haven and could push the price of gold much higher,” NAB Capital analyst John Kyriakopoulos said.
“We suspect that further dollar weakness is likely in the short-term,” he added. If the European Central Bank also announces similar moves to put more money in circulation in the eurozone, that could support the dollar against the euro, although it looks unlikely in the short-term, Kyriakopoulos said.
Some traders said the Fed’s actions could ultimately be positive for the greenback if they help put the US economy back on its feet, noting that US shares had rallied in response to the announcement. I think the market believes that, overall, the Fed’s decision is positive for the US economy,” Resona Bank’s Otsubo said. “In the long run, I believe the dollar should find solid support.”
Indian rupee opens at Rs 51.40 per dollar
The Indian Rupee opened at Rs 51.40 per dollar versus Rs 51.41 per dollar on Monday. According to Manis Thanawala, Greenback Forex Services, the rupee may see weakness today as US markets closed flat and Asian markets are mixed today. The range for the day is seen between Rs 51.20-51.60 per dollar. According to Commtrendz Research’s report on Indian Rupee, immediate supports are at 51.1/51.10 followed by 50.70/50.80. Immediate resistance falls around 51.60/51.8 followed by 52.10/52.20 levels.
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