Sunday, 14th April 2024

Dollar hit buy support for QE

Published:  22 May at 9 AM
Chairman of the Federal Reserve, Ben Bernanke, is due to give a clearer indication on whether the central bank will be bringing an end to its monetary easing policy any time soon. Speculation that the Fed will be wrapping up quantitative easing has seen the dollar gain around 5 per cent since the beginning of the year. However, the dollar dipped yesterday following comments by the St Louis Fed President that a policy of bond buying should remain in place and be adjusted against incoming economic data.

An announcement that bond buying is to continue would put pressure on the dollar. The euro rose 0.3 per cent against the greenback earlier to $1.2922. However, the dollar is holding its own against a weak yen and was last at 102.34, a rise of 0.1 per cent.

The Bank of Japan is meeting to discuss policy at the moment, although no major changes are expected. The authorities are maintaining pressure on the yen and aiming for inflation of 2 per cent.

The dollar is being supported by positive economic data coming out of the US. In the eurozone, the single currency remains under pressure as the bloc struggles with recession.

Expectations are high that the European Central Bank is about to announce a below zero deposit rate which will hit the euro and prompt capital outflows.