Forexpros – The dollar rose against most major world currencies on Thursday after the Federal Reserve left interest rates unchanged, expanded a program that extends the average duration of its Treasury holdings but stopped short of rolling out a direct bond buyback program to spur economic recovery.
In Asian trading on Thursday, EUR/USD was trading down 0.33% at 1.2666.
The dollar rose in early Asian trading on news the Federal Reserve moved to bolster the economy by expanding a USD400 billion program that shuffles its Treasury holdings, known as Operation Twist, by another USD267 billion.
Under Operation Twist, the Fed purchases Treasury securities with remaining maturities of 6 years to 30 years while selling an equal amount of Treasury securities with remaining maturities of 3 years or less with the aim of keeping long-term interest rates low.
The Fed also left its benchmark interest rate target at 0.25%.
While easing measures tend to weaken the greenback, the market held expectations that the Fed would resort to a more powerful stimulus tool known as quantitative easing, under which the Fed steps in and buys Treasurys and other assets directly from banks, injecting the economy full of liquidity in the process to encourage economic recovery and hiring.
Unlike quantitative easing, Operation Twist does not expand the Fed’s balance sheet and does not involve pumping massive amounts of liquidity into the economy that weakens the dollar with the aim of fueling recovery.
The policy announcement sent the greenback firming against other currencies.
Greece, meanwhile, created a coalition government headed by Antonis Samaras of the New Democracy party, while Spanish bond yields fell to 6.75%, and while high, they were still below recent levels of over 7%, which is deemed unsustainable by the markets.
However, ongoing concerns that the European debt crisis shows no sign of abating kept the greenback attractive.
Stronger-than-expected economic growth rates out of New Zealand pushed the kiwi higher against the dollar.
The New Zealand gross domestic product grew 1.1% in the first quarter of this year, well above expectations for 0.5% growth thanks to robust agriculture and manufacturing sectors.
The New Zealand economy grew 0.4% in the fourth quarter of last year.
The pound, meanwhile, fell against the greenback after the minutes of the Bank of England’s June meeting showed that four policymakers, including central bank Governor Mervyn King, voted in favor of another round of quantitative easing this month, while five voted against.
Meanwhile, the U.K. reported that 8,100 people claimed unemployment benefits in May, far worse than market calls for a decline of 3,000.
The U.K. unemployment rate held steady at 8.2%, in line with expectations.
The greenback, meanwhile, was up against the pound, with GBP/USD down 0.19% and trading at 1.5689.
The U.S. currency was up against the yen, with USD/JPY trading up 0.10% at 79.61, and up against the Swiss franc, with USD/CHF trading up 0.33% at 0.9484.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.28% at 1.0211, AUD/USD down 0.23% at 1.0170 and NZD/USD up 0.09% at 0.7970.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.23% at 81.79.
Later Thursday, the U.S. will unveil weekly initial jobless claims followed by preliminary data on manufacturing activity and an industry report on existing home sales.
The country is also to release data on manufacturing activity in the Philadelphia area.
Forexpros
