US Dollar Drops as Forex Traders Expect More Stimulus from the Fed

Greenback is heading lower today, falling as the Federal Reserve prepares to announce its latest policy decision. While interest rates are expected to remain near zero, Forex traders and others are waiting to hear about the possibility of further stimulus.

Later, more movement in the markets will be seen after Fed Chair Ben Bernanke makes his statement about Fed policy. Many, however, are already anticipating further stimulus. The Federal Reserve has already announced that it will engage in a program to buy bonds outright, in an effort to stimulate the economy. Some are already speculating that today’s announcement will include more bond buying, since Operation Twist is expiring.
Ben Bernanke has, in the past, expressed the opinion that more needs to be done to stimulate the economy. Even with small signs of growth in the US economy, there are still disappointments, and the growth isn’t happening quickly. Plus, Fed members might decide that they can’t wait around for politicians to solve the fiscal cliff issue. A little stimulus might be the way that they prepare for the economic drag expected by the cliff.
Right now, this has weighed on the greenback, as expectations of further stimulus weaken the dollar.
At 13:38 GMT EUR/USD is up to 1.3042 from the open at 1.3006. GBP/USD is up to 1.6144, up from the open at 1.6114. USD/CAD is down to 0.9858 from the open at 0.9861.

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