Forex News – Dollar Holds Three-Day Decline Before Fed Interest-Rate Decision

The dollar held a three-day decline as signs of an uneven U.S. economic recovery caused investors to adjust their outlooks for interest rates next year before the Federal Reserve sets monetary policy today.

 

The U.S. currency was near a one-week low versus a basket of major counterparts after data yesterday showed orders for durable goods unexpectedly declined. The Fed said in September that it would conclude quantitative easing this month if the economy keeps improving. Traders have pushed back bets on when the Federal Open Market Committee will raise interest rates. South Korea’s won rose to a one-month high.

 

“The end of QE is all but certain, but the question is how the Fed views the mixed economic data,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “If the statement retains the phrase that rates will stay low for a ‘considerable time,’ the immediate reaction may be to sell the dollar.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, was little changed at 1,063.31 as of 10:47 a.m. in Tokyo, after touching 1,062.65 yesterday, the lowest level since Oct. 21.

 

The dollar fetched $1.2735 per euro from $1.2734 in New York, after declining 0.7 percent in the previous three days. It was little changed at 108.15 yen. Japan’s currency was unchanged at 137.73 per euro.

 

The won gained 0.2 percent to 1,047.05 per dollar, after earlier touching 1,045.58, the strongest level since Sept. 26, according to prices compiled by Bloomberg.

 

Bookings for goods meant to last at least three years decreased 1.3 percent after falling 18.3 percent in August, a U.S. Commerce Department report showed yesterday in Washington.

 

Bloomberg’s dollar index is headed for a 0.7 percent drop in October, its first losing month since June, as traders cut bets on an early Fed rate gain. The odds of rates going up by October 2015 are at 50 percent, from 85 percent on Sept. 30. Policy makers have kept their key rate at zero to 0.25 percent since December 2008.

 

Source: Bloomberg (29 Oct 2014)