The U.S. Dollar firmed broadly on increasing speculation that the Federal Reserve Bank is likely to continue to taper quantitative easing as the U.S. economic recovery seems to be more solid than originally assumed. As a result, and especially ahead of the start of a 2-day policy meeting for the Fed, the greenback moved higher against the safe haven Yen with FX market players wary of moving too aggressively against the greenback.
As reported at 11:32 a.m. (JST) in Tokyo, the USD/JPY pair edged 0.1% higher to trade at 102.65 Japanese Yen, a solid rebound from yesterday’s 7-week trough at 101.77 Yen. The Euro steadied against the Japanese Yen, trading at 140.26 Yen and moving away from 139.12 Yen which was yesterday’s 7-week low. The EUR/USD was also steady at $1.3672, close to last Friday’s 3-week peak at $1.3470.
More Fed Tapering Seen
Analysts at Barclays Bank believe that the Fed is likely to hold interest rates at current levels but will likely pull back an additional $10 billion per month in bond purchases given an improved outlook for the U.S. economy. Those analysts who don’t hold with the consensus view believe that the Fed will also take into consideration the larger impact of stimulus withdrawal, especially on emergent economies which saw a large selloff over the past few trading sessions, however, in the short term, the likely outlook remains for further gradual tapering.