US Dollar Rallies as FOMC Fails to Deliver Dovish Comments
- US Dollar rallies on less dovish than expected FOMC statement
- Fed says will adjust taper only after more evidence of sustained progress
- USD/JPY hits a weekly high
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The US Dollar rallied on Wednesday, as the FOMC’s monthly rate statement was perceived as less dovish than expected.
Following a two-day meeting, the Federal Reserve left the asset purchase rate at 85 billion dollars a month and the interest rate target at 0.25%, as expected. Regarding the start of a taper, the FOMC said that the committee will await more evidence that progress will be sustained before adjusting the pace of quantitative easing.
Leading into the release, the median expectation among Bloomberg surveyed analysts was for the Fed to begin its taper in March of 2014. The Fed said in today’s release that economic activity has continued to expand at a moderate pace. However, following the recent government shutdown and debt ceiling crisis, the Fed said that fiscal policy is restraining economic activity.
Last June, Federal Reserve Chairman Bernanke said that the Fed will probably taper its bond purchases later in 2013 and halt QE in mid-2014. However, the Fed surprised markets by not tapering in September, and the recent government problems mentioned above seemed to have delayed the taper timeline even further. Fed determines it's monetary policy based on unemployment and inflation rate targets, and the FOMC statement mentioned today that 0.25% target interest rate remains appropriate as long as unemployment remains above 6.5%.
The comments were apparently not as dovish as expected, and the US Dollar rose against major pairs in Forex markets. USD/JPY continues to rise to new weekly highs at the time of this writing, and a monthly high may provide resistance at 99.00. The 100-day moving average may provide support at 98.39.
USD/JPY 1-Minute: October 30, 2013
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to email@example.com .
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