U.S. Dollar Advances On Fed Guidance

01:24, 18th September 2014

(RTTNews) - The U.S. dollar strengthened against the other major currencies in the Asian session on Thursday following the hawkish tone that emerged from the FOMC meeting that concluded yesterday.

Dollar has gained strength recently, as traders bet that a strong U.S. recovery would prompt the Fed to send a signal on when it would raise interest rates from the current near zero levels.

Following the conclusion of a two-day meeting of the Fed's Open Market Committee (FOMC) on Wednesday, the Fed reiterated its pledge to keep its pledge to keep near-zero rates in place for a "considerable time" after its bond-buying stimulus program ends.

Although policy makers refrained from offering a more specific time-line for raising interest rates, the central bank reduced its monthly asset purchases to $15 billion, and said the program will likely end in October.

The Fed struck a somewhat cautious tone in its assessment of the jobs situation, acknowledging significant slack in the labor market. Job growth slowed last month even as unemployment rate dipped back down to 6.1 percent.

"If incoming information broadly supports the committee's expectation of ongoing improvement in the labor market, and inflation moving back over time towards its 2% longer run objective the committee will end this program at our next meeting," said Fed Chair Janet Yellen in a press conference explaining the decision.

Yellen said inflation has firmed some since earlier in the year and the committee believes that the likelihood of inflation running persistently below 2 percent has diminished. That's despite an unexpected drop in consumer prices in August.

In the New York session overnight, the U.S. dollar was higher against the other major currencies.

The U.S. dollar rose to a 6-year high of 108.74 against the yen and a 1-year high of 0.9432 against the Swiss franc, from early lows of 108.31 and 0.9402, respectively. If the greenback extends its uptrend, it is likely to find resistance around 109.01 against the yen and 0.946 against the franc.

The dollar, which ended yesterday's deals at 1.2858 against the euro, rallied to a 14-month high of 1.2833. This may be compared to an early low of 1.2872. The greenback is likely to find resistance around the 1.27 area.

Moving away from an early low of 1.6278 against the pound, the greenback appreciated to a 2-day high of 1.6245. At yesterday's close, the greenback was trading at 1.6268 against the pound. The greenback may test resistance near the 1.60 region.

Looking ahead, Swiss trade data and Japan machine tool orders for August are due in the Asian session.

In the European session, U.K. Retail Sales for August and European Central Bank's Targeted Long Term Refinancing Option (LTRO) Allotment are due.

The Swiss National Bank will announce its interest rate decision at 3:30 am ET. The bank is expected to maintain the 3-month Swiss Libor rate target unchanged at 0 percent, while it is also likely to retain the EUR/CHF exchange rate floor at 1.20.

In the New York session, U.S. building permits and housing starts for August and U.S. weekly jobless claims for the week ended September 13 are due to be released.