Dollar rises after Fed keeps asset-buying programme

December 15, 2010 | 18:01

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The dollar rose against the yen and euro in Asia Wednesday after the US central bank said it would maintain its huge asset purchases programme to support the weak economic recovery, analysts said.

The dollar rose to 83.81 yen in Tokyo morning trade from 83.66 yen in New York late Tuesday.

The euro fell to $1.3358 from $1.3375 while edging up to 111.97 yen from 111.90 yen.

"Buying is exceeding selling for the dollar" as the US Federal Reserve's policy-making body said after a meeting Tuesday it would maintain the current measures, said Mizuho Corproate Bank market economist Daisuke Karakama.

"Some (market players) had expected that a further monetary easing measure would be announced but the outcome was to maintain the 600 billion dollar programme" to buy Treasury bonds, Karakama said.

It led to lower bond prices and higher yields, sending the dollar up, he said.

The Federal Open Market Committee also held record-low interest rates unchanged as widely expected.

The central bank's policymakers said the recovery was too weak to reduce high unemployment, a key challenge in getting the world's largest economy back on a sustainable course, and inflation trends were worryingly weak.

Currency rates were almost unchanged after the Bank of Japan early Wednesday released a business sentiment survey, which showed the first worsening in nearly two years, dealers said.

The euro was under pressure amid continuing worries over eurozone fiscal debts.

The euro fell back after a brief boost overnight on Germany's ZEW economic expectations indicator that showed investors were upbeat going into 2011, Karakama said.

"We know Germany is OK. The problem is the rest of the eurozone countries," he said, adding the common currency could drop below $1.3 on fresh negative news on sovereign debts in Europe.

AFP

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