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Dollar Supported by FOMC Minutes - 4.4.2012

US Dollar The dollar rocketed against all its major counterparts yesterday and extended gains in Asian trading hours after the Federal Reserve Open Market Committee released the minutes of its March 13 policy meeting. According to the minutes, policy makers considered that the recent improvements in the economy reduced the urgency in taking additional stimuli, while more measures could be required if the growth “lost momentum” or inflation “dropped below 2% target”. At the same time the Committee sticks to the plan of keeping interest rates low until late 2014, however the schedule may be revised “in response to significant changes in the economic outlook”. At the moment “most participants did not interpret the recent economic and financial information as pointing to a material revision to the outlook for 2013 and 2014,” the minutes said. The dollar index, which tracks the greenback against a basket of six major US trading partners’ currencies, rose from yesterday’s 5-week low 78.66 and touched 79.52 in Asian trading hours, the highest since March 26. Today the data from the States may confirm the ongoing recovery, as ADP Employer Services is expected to report the nation’s companies hired more than 200000 workers in March and the Institute for Supply Management may show economic activity in the services sector also expanded over the same period. Euro The single currency fell under pressure against the dollar after the Fed minutes and before the European Central Bank’s policy meeting today. The pair dropped from yesterday’s high of 1.3366 and touched in the morning a 2-week low at 1.3183. The ECB is expected to leave the main refinancing rate at 1%. Moreover reports from the euro area may show the region’s retail sales dropped in February by 0.2%, compared with a 0.3% gain in January. In Asian trading hours the euro also weakened versus the Japanese yen from 109.69 to 108.95. Australian Dollar The aussie maintains a clear short-term downtrend against the greenback since March. In Asian trading hours the pair dived to 1.0263, the lowest level since January 13, after a private report showed the Australian services industry shrank in March and the nation unexpectedly posted a trade deficit in February. The volume of imports exceeded the volume of exports by 480 million Australian dollars, compared with a revised deficit of 971 million in the previous month, according to the Bureau of Statistics. Two consecutive months of trade deficit were lastly seen in the first quarter of 2010.
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