Fin24

Dollar weaker before Fed announcement

2012-09-13 07:59

Tokyo - The dollar edged down in Asia on Thursday as dealers await the outcome of a US Federal Reserve policy meeting expected to result in further easing measures to boost the world's biggest economy.

The greenback bought ¥77.70 in Tokyo trade against ¥77.84 in New York late on Wednesday.

The euro - which jumped after a German court on Wednesday ruled the eurozone's permanent bailout fund was legal - rose to $1.2925 from $1.2899 in New York and to ¥100.46 from ¥100.42.

The Federal Open Market Committee's two-day policy meeting was to wrap up later on Thursday with the expectation that the bank will announce a new round of bond-buying known as quantitative easing, which would see a flood of dollars hit the market.

"The countdown to tonight's FOMC decision is set to keep trading subdued on Thursday amid a non-descript domestic calendar," National Australia Bank said in a note.

Currency markets were also eyeing Spain to see if Madrid taps a new European Central Bank bond-buying programme aimed at bringing down borrowing costs for debt-hit members of the 17-nation eurozone.

Spain has been widely expected to seek a rescue from the ECB programme, which offers to buy government debt from nations that accept strict conditions designed to repair their fiscal health.

But lower borrowing costs since the ECB revealed its plan this month have led to speculation that Madrid may try to avoid a rescue altogether, a strategy some analysts say is risky.

"I still don't know the conditions nor whether it is necessary for Spain to request it," Spanish Prime Minister Mariano Rajoy told parliament.

National Australia Bank said: "If and when he does (accept help), the euro should receive some further support."

The dollar was trading at 1,128.75 South Korea won, up from 1,125.50 won the previous day, after South Korea's central bank on Thursday kept its key interest rate unchanged at 3.0%.

The move defied expectations that it would take advantage of low inflation to announce an economy-boosting rate cut.

The dollar was also mostly firm against other Asia-Pacific currencies.

It rose to 31.01 Thai baht from 30.92 baht on Wednesday, to 55.41 Indian rupees from 55.23 rupees, to 41.70 Philippine pesos from 41.47 pesos, and to Sg$1.2285 from Sg$1.2280.

The US unit was unchanged at Tw$29.58 and at 9,575 Indonesian rupiah.

China's yuan slipped to ¥12.25 from ¥12.30 while the Australian dollar inched down to $1.0477 from $1.0479.


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