Dollar Achieves Largest Surge in Seven Months for Fed Rate Prospects
March 20, 2014 7:55 am
The dollar clinches its largest increase in seven months against a basket of its counterparts after Federal Reserve policy makers signaled they’ll possibly hike interest rate by the middle of next year.
New Zealand’s dollar led pullbacks in major currencies versus the greenback after data showed the South Pacific nation’s economic development slowed in the fourth quarter and Asian stocks declined. The Federal Open Market Committee dismissed an unemployment-rate threshold for considering when to boost borrowing costs and said it will look at a wide range of data. Policy makers also trimmed down monthly bond purchasing by $10 billion.
“A hawkish Fed is spurring dollar buying,” said Yuki Sakasai, a currency strategist in New York at Barclays Plc. “The outlook for the pace of policy tightening is faster than markets have priced in.”
The Bloomberg Dollar Spot Index, which oversees the U.S. currency versus its 10 major peers, was slightly altered at 1,020.23 as of 10:01 a.m. in Tokyo following a 0.8 percent increase yesterday, the biggest since August 1 on a closing basis.
The dollar inched up 0.1 percent to $1.3824 per euro, after leaping 0.7 percent yesterday. It was at 102.28 yen following a 0.9 percent hike to 102.32 in New York. The euro purchased 141.40 yen from 141.54.
The Fed trim monthly bond purchases to $55 billion and said in a statement it will cut purchasing in “further measured steps.” Economists in a Bloomberg survey projection policy makers will declare an end to the program in October.
Policy Outlook
Fed Chair Janet Yellen sees a “considerable time” between the end of the stimulus and the first rate hike, meaning “around six months or that type of thing,” she said at a press conference after presiding her first policy assembly.
Central-bank officials calculated the benchmark rate goal will be 1 percent at the last part of 2015 and 2.25 percent in the upcoming year. That was greater than in December, when they projected 0.75 percent and 1.75 percent. The rate has been maintained at zero to 0.25 percent since December 2008 to support the economy.
“The Fed’s announcement confirms our view that the rising-dollar trend will accelerate in the six-month to one-year term,” Barclays’s Sakasai said.
Treasury two-year yields bolstered as much as 10 basis points yesterday, the most since 2011. The prospects for increasing borrowing costs damped demand for greater-yielding assets, with the MSCI Asia Pacific Index of shares pulling 1 percent lower today.
The central bank has bring down monthly bond purchases under its quantitative-easing stimulus strategy from $85 billion last year after operating three rounds of bond purchasing since 2008.
The New Zealand dollar retreated after data showed gross domestic product progressed 0.9 percent in the fourth quarter, equaling the median economist projection, down from revised growth of 1.2 percent in the previous three months.
The kiwi dollar plunged down 0.4 percent to 85.28 U.S. cents, after declining 0.7 percent yesterday. Aussie dollar gave up 0.2 percent to 90.22 U.S. cents.
The material has been provided by InstaForex Company – www.instaforex.com
The dollar clinches its largest increase in seven months against a basket of its counterparts after Federal Reserve policy makers signaled they’ll possibly hike interest rate by the middle of next year.
New Zealand’s dollar led pullbacks in major currencies versus the greenback after data showed the South Pacific nation’s economic development slowed in the fourth quarter and Asian stocks declined. The Federal Open Market Committee dismissed an unemployment-rate threshold for considering when to boost borrowing costs and said it will look at a wide range of data. Policy makers also trimmed down monthly bond purchasing by $10 billion.
“A hawkish Fed is spurring dollar buying,” said Yuki Sakasai, a currency strategist in New York at Barclays Plc. “The outlook for the pace of policy tightening is faster than markets have priced in.”
The Bloomberg Dollar Spot Index, which oversees the U.S. currency versus its 10 major peers, was slightly altered at 1,020.23 as of 10:01 a.m. in Tokyo following a 0.8 percent increase yesterday, the biggest since August 1 on a closing basis.
The dollar inched up 0.1 percent to $1.3824 per euro, after leaping 0.7 percent yesterday. It was at 102.28 yen following a 0.9 percent hike to 102.32 in New York. The euro purchased 141.40 yen from 141.54.
The Fed trim monthly bond purchases to $55 billion and said in a statement it will cut purchasing in “further measured steps.” Economists in a Bloomberg survey projection policy makers will declare an end to the program in October.
Policy Outlook
Fed Chair Janet Yellen sees a “considerable time” between the end of the stimulus and the first rate hike, meaning “around six months or that type of thing,” she said at a press conference after presiding her first policy assembly.
Central-bank officials calculated the benchmark rate goal will be 1 percent at the last part of 2015 and 2.25 percent in the upcoming year. That was greater than in December, when they projected 0.75 percent and 1.75 percent. The rate has been maintained at zero to 0.25 percent since December 2008 to support the economy.
“The Fed’s announcement confirms our view that the rising-dollar trend will accelerate in the six-month to one-year term,” Barclays’s Sakasai said.
Treasury two-year yields bolstered as much as 10 basis points yesterday, the most since 2011. The prospects for increasing borrowing costs damped demand for greater-yielding assets, with the MSCI Asia Pacific Index of shares pulling 1 percent lower today.
The central bank has bring down monthly bond purchases under its quantitative-easing stimulus strategy from $85 billion last year after operating three rounds of bond purchasing since 2008.
The New Zealand dollar retreated after data showed gross domestic product progressed 0.9 percent in the fourth quarter, equaling the median economist projection, down from revised growth of 1.2 percent in the previous three months.
The kiwi dollar plunged down 0.4 percent to 85.28 U.S. cents, after declining 0.7 percent yesterday. Aussie dollar gave up 0.2 percent to 90.22 U.S. cents.
The material has been provided by InstaForex Company – www.instaforex.com
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