The US dollar slumped today to the lowest level since May against the euro and the Great Britain pound and to the lowest since February versus the Japanese yen after the Federal Reserve announced that it is going to start the third round of the asset purchase program known as quantitative easing.
The Fed said in today’s statement:
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.
The central bank also reiterated that it will be performing the Operation Twist till the end of this year. The Fed also extended its pledge to keep the interest rates low through at least mid-2015.
The decision was largely price in, but the dollar suffered nevertheless. Some economists argued that the scale of the asset purchases is smaller than anticipated, meaning that the US currency may rebound soon. Anyway, the greenback is under pressure for now, at least until traders digest the news.
EUR/USD was up from 1.2898 to 1.2987 and GBP/USD advanced from 1.6104 to 1.6150 as of 20:51 GMT today. USD/JPY dropped from 77.83 to to 77.49 and touched 77.12 intraday — the low not seen since February 9.
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