The Australian dollar was flat today as the outcome of the Federal Reserve policy meeting was somewhat disappointing and news from Europe was mixed. The Aussie advanced versus the yen, which dropped against all of 16 most-traded currencies.
The Fed said that it is going to expand its asset purchase program, replacing short-term bonds with longer term debt. The long-awaited announcement of additional stimulus had not the expected impact on the Forex market. It is not uncommon that expectations of some important event push market too far in one direction and when the anticipated event happens market goes completely opposite way, frustrating traders.
German Chancellor Angela Merkel opposed the idea of direct buying of sovereign debt through the European bailout fund, signaling that European leaders still have disagreement about ways to tackle the financial crisis. Yet she admitted that such actions are legally possible:
There is no concrete planning that I know about, but there is the possibility of purchasing sovereign bonds on the secondary market. But this is a purely theoretical statement about the legal situation.
There was another piece of good news: the Group of Twenty supported Europe’s plan to create a more integrated banking system.
AUD/USD was near its opening level of 1.0190 and EUR/AUD was little changed at 1.2435 as of 23:47 GMT today. AUD/JPY jumped from 80.43 to 81.05 and its intraday high of 81.42 was the highest since May 8.
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