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Dollar Weaker After Fed Trims Stimulus

April 30, 2014 at 22:09 by Vladimir Vyun

The all-seeing eye on top of pyramid on one-dollar billThe US dollar dipped today even after the Federal Reserve trimmed its stimulus program yet again. The possible reason for the drop was the mention of low interest rate for a prolonged period of time and also the unexpected halt of economic growth in the United States.

The Fed ended its two-day monetary policy meeting today. The central bank was mildly positive about developments in the economy, saying:

The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases.

The size of the reduction was at $10 billion — exactly as market participants were expecting. At the same time, the Fed suggested that an interest rate hike is not probable in the foreseeable future:

The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.

The US economy barely grew in the first quarter of 2014, expanding by just 0.1 percent, far slower that economists have expected, yet the sluggish growth is viewed to be just a result of the winter period. Other macroeconomic indicators (which show economic conditions in spring) were positive, supporting such theory.

EUR/USD climbed from 1.3811 to 1.3866 as of 22:06 GMT today. GBP/USD advanced from 1.6826 to 1.6873, reaching the high of 1.6900 intraday — the strongest level since August 2009. USD/JPY went down from 102.62 to 102.21.

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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