The dollar extended gains after minutes of the Federal Reserve’s last meeting showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves.
Almost all of the Federal Reserve officials at their July meeting backed Fed Chief Ben Bernanke's stance that the Fed would slow down the pace of its $85 billion-per-month asset purchase plan later this year if economic conditions continue to develop broadly as expected, according to the minutes of the conclave released Wednesday. The central bankers did not signal as to whether such a taper would come in September, October or December, the three remaining meeting dates. There were few signs that a majority was poised to pull the trigger at the September meeting. While a "few" argued that "it might soon be time to slow somewhat" the pace of asset purchases, another "few" counseled patience. The central bankers considered, but decided again, adding language to the policy statement on the data-dependent taper plan, fearing market overreaction. After initial turmoil in the wake of its June meeting, Fed officials thought generally that the market expectations had settled down by late July and were "aligned" with Fed views. Some officials said they were happy that interest rates had risen and there had been an unwinding of speculative positions. The Fed also discussed setting up a new overnight reverse repo facility to use as a new tool to accomplish its exit strategy.
The dollar advanced to a two-week high against the yen as initial jobless claims over the past month in the U.S. fell to a five-year low, boosting the case for the Federal Reserve to reduce stimulus.
The U.S. currency gained as housing prices and a gauge of leading indicators climbed a day after minutes of the Federal Open Market Committee’s last meeting showed most members were “broadly comfortable” with the plan to trim stimulus this year.
The number of U.S. claims for unemployment insurance in the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007, a Labor Department report showed today in Washington. Compared with a week earlier, claims rose by 13,000 to 336,000, in line with the median forecast.
An index of U.S. house prices climbed 0.7% in June from a revised 0.8% gain the previous month, according to the Federal Housing Finance Agency, and compared with a 0.6% rise forecast.
The Conference Board’s index of leading economic indicators increased 0.6% in July, the New York-based group said. The median forecast called for a 0.5% advance.
In the midday the Euro was an exception among falling main currecies as strong Manufacturing PMI and Services PMI data helped the pair to rise. However, it was not for a long time and the pair renewed its dropping.
ЕURO
The Euro rose from session lows after unexpectedly strong EU Manufacturing PMI and Services PMI data. Indicators show Euro-Zone expansion accelerates. However, later the pair’s falling down was renewed.
The common currency has got some support from ECB’s Novotny speech. Novotn noted cautious optimism concern EU economy conditions. Moreover, he said that a recent “stream of good news” from the euro-area economy has removed any need to cut interest rates from an already record low. However, despite of strong data a lot of European countries are still in recession. If there is one place in the world where interest rates can still go down, it’s Europe, - experts remainded.
POUND
The pound dropped amid positive news for dollar from Fed. The cable rose sharply after data showed O2 GDP increasing. The pair advanced despite some dissapointing BBA Mortgage Approvals data. Bulish moods still relevant.
YEN
The yen fell versus US currency as foreign investments in Japanese securities came out.
The Japanese Finance Minister Aso reported to say that ‘economic indicators are all improving so far’. Furthermore, he added that “he doesn't see any convincing reason to postpone the sales-tax rise”, although there was not significant reaction after this comment.
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