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Fed Tapers, Dollar’s Gains Limited

January 30, 2014 at 5:36 by Vladimir Vyun

Panoramic view on many US hundred-dollar billsThe US dollar rose today after the Federal Reserve performed quantitative easing tapering yesterday. Surprisingly, the Forex market did not react very strongly to the news and the dollars’ gains were not particularly big.

The Fed announced yesterday that it is going to reduce the size of monthly purchases by yet another $10 billion. The statement said:

Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.

This means that the size of asset-purchase program now stands at $65 billion per month.

The dollar reaction to the announcement was muted. One of the possible reasons for this is perhaps the fact that such a move was expected and has been already priced in.

EUR/USD fell from 1.3659 to 1.3646 as of 5:33 GMT today. GBP/USD was down from 1.6564 to 1.6552, while USD/JPY went up from 102.27 to 102.38.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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