Dollar down ahead of Fed announcement

Published: 22 May at 9 AM Tags: Euro, Dollar,

The US dollar dropped against the euro ahead of an announcement today by head of the Federal Reserve, Ben Bernanke, that analysts are hoping will shed some light on whether the central bank intends to go ahead with its policy of quantitative easing.

Doubts that a policy of monetary easing will come to end in the short term were sown by James Bullard, St Louis Fed President, when he said he thought QE should continue but that bond buying should be adjusted in line with economic data.

The euro hit $1.2922, up 0.3 per cent after Charles Evans, Chicago Fed President said on Monday that bond buying should continue for the time being but be ended when the labour market proves to be on firm footing.

The dollar was up 0.1 per cent against the yen to 102.34. A policy meeting at the Bank of Japan is not expected to throw up any surprises although analysts expect the yen to remain weak.

Japan’s central bank is aiming to continue to keep its currency weak as it aims for inflation of 2 per cent. Data coming out of the US suggests that the economy is on the road to recovery whereas similar figures coming out of the eurozone indicate recession.