Greenback Broadly Higher on Fed Stance

The U.S. Dollar firmed during the Asian trading session after yesterday’s broad rally in the wake of the announcement by the Federal Reserve Bank that it would start to ease back on its stimulus program, perhaps beginning as soon as the year’s end, provided that the U.S. economic recovery continues as expected. Under the Fed’s current quantitative easing program, asset purchases of $85 billion per month are being made, but the Fed chief Ben Bernanke suggested that by this time next year the program’s monthly purchases might finally be halted.

With the news, the U.S. Dollar Index, the measure of the greenback’s relative strength compared to its major rivals, surged nearly 1% to 81.501 .DXY before settling back to 81.414 .DXY. As reported at 11:07 a.m. (JST) the USD/JPY pair gained 0.2% to trade at 96.65 Yen, moving away from a 1-month trough of 93.75 Yen. The EUR/USD slipped from a recently struck 4-month peak to trade at $1.3282, and commodity-linked currencies fall even harder with the AUD/USD pair tumbling to $0.9260, a 33-month low. Analysts believe that upcoming Chinese data could put even more pressure on the commodity-linked currencies as fears of a hard landing have grown in recent months despite China’s government’s efforts to avoid it.