USD Eases, FOMC Unchanged

Traders sold off the dollar sharply following the FOMC’s monetary policy announcement, in which the Fed held interest rates unchanged by unanimous decision at 0.0%-0.25%. The greenback relinquished the 1.48-level against the euro and slumped to its session lows versus the British pound at 1.6467.

In line with Fed Chairman Bernanke’s comments a few weeks ago, the accompany monetary policy statement reinforced sentiment that the worst may be over, stating “information received since the FOMC met in August suggests that economic activity has picked up following its severe downturn”. The Fed remained upbeat, saying “conditions in financial markets have improved further, and activity in the housing sector has increased”. Moreover, the Fed said “although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability”.

The Fed will also wind down its asset-purchase program, reiterating that its $300 billion purchases of Treasuries will be completed at the end of next month. Additionally, “the Committee will gradually slow the pace of agency mortgage-backed securities and agency debt in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter 2010”.

source:forexnews