Dollar Advances Against Pound as Fed May Signal Stimulus Exit
Sept. 21 (BloombergTV) -- The dollar advanced to a two-week high against the
pound on speculation U.S. policy makers will this week signal they may withdraw
economic stimulus measures, boosting the appeal of the nation’s assets.
The dollar rose versus 13 of the 16 major currencies before a U.S. report
economists said will show an index of leading indicators gained a fifth month,
backing the case for the Federal Reserve to wean the economy off support. The
yen was near a three-week low versus the euro after Finance Minister Hirohisa
Fujii edged away from comments last week that were interpreted to mean he would
let the yen rise. Trading was likely to be light as Japan starts three days of
public holidays.
“There’s a risk the FOMC will indicate at some point they will start
withdrawing their stimulus to the economy,” said Joseph Capurso, a currency
strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest
lender by assets. “The catalyst for the dollar strengthening on a sustained
basis is likely to come from the FOMC.”
The U.S. currency rose to $1.6231 per pound as of 1:01 p.m. in Tokyo from
$1.6271 in New York on Sept. 18, after earlier rising to $1.6210, the highest
level since Sept. 2. The dollar traded at $1.4686 per euro from $1.4712.
The yen was at 134.42 per euro from 134.33 last week. It declined to 134.77 on
Sept. 17, the lowest level since Aug. 28. Japan’s currency fetched 91.53 per
dollar from 91.29.
Dollar Index
The Dollar Index, which the ICE uses to track the dollar against the currencies
of six major U.S. trading partners, rose 0.2 percent to 76.606.
Foreign-exchange trading may be more subdued than usual in Asian trading hours
today because of public holidays in Japan, said Sue Trinh, a senior currency
strategist at RBC Capital Markets in Sydney.
The Fed will keep its target rate for overnight loans in a range of zero to
0.25 percent at its two-day policy meeting starting tomorrow, according to all
91 economists surveyed by Bloomberg News. Chairman Ben S. Bernanke said in
Washington on Sept. 15 that the worst U.S. recession since the 1930s has
probably ended.
“That’s why there might be a little bit of nervousness going into the FOMC if
they start signaling any potential unwind of quantitative easing,” Tony
Morriss, senior markets strategist in Sydney at Australia & New Zealand Banking
Group Ltd., said in a Bloomberg Television interview. “There is a bit of risk
over the next couple of days of the dollar starting to recover a little bit of
ground.”
