Dovish Fed Sends Dollar Down

By: Barbara Zigah

The U.S. Dollar Index stayed close to a 3-week low as the Federal Reserve took a more dovish stance than markets were expecting. As reported at 12:16 p.m. (JST) in Tokyo, the U.S. Dollar Index, a measure of the greenback’s strength relative to a collective basket of currencies, was trading at 79.063 .DXY, recovering from a low of 78.995 .DXY. Fed Chairman Ben Bernanke said after the 2-day policy meeting that the Fed would not hesitate to provide additional stimulus in the form of asset purchases if the membership believed it warranted.

The Euro also rose against the U.S. Dollar as a result, trading at $1.3234, a 3-week peak, but faces resistance at $1.3240, with a break of it bringing more resistance at $1.3370. The U.S. Dollar was also lower against the Japanese Yen, trading at 81.23 Yen but remains within a tight trading band; analysts say trading of the USD/JPY is likely to be subdued ahead of the Japanese central bank meeting scheduled for tomorrow. A consensus of a poll of economists is predicting that the Bank of Japan will likely provide additional stimulus through asset purchases, which will serve to weaken the Yen further.