Stock Market Watch

Forex Market Update: Dollar Index Falls to Eight and Half Month Low

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The dollar index slipped to its eight and half month low on Friday as investors are worried that Washington’s temporary solution to avert the debt default will stoke uncertainty, which in turn keep pressure on the Federal Reserve to continue its bond purchase program.

At last check, the dollar Index, a gauge on U.S. unit’s performance against a basket of six major traded currencies, slipped 0.07% to 79.63.

Analysts say that the recent government shutdown knocked-down both the business and consumer sentiment. In addition, Washington’s policy of ‘kicking the can down the road’ is also keeping investors edgy. The budget deal, which was passed on Wednesday, allows the treasury to expand its borrowing authority until Feb. 7.

Market participants had anticipated the Federal Reserve to start scaling down its asset purchase program by September.

However, the outgoing Fed Chairman Ben Bernanke wrong-footed everyone by keeping the bank’s accommodative monetary policy intact in the last open market committee meeting.

Later, the minutes showed that most of the policymakers were in favor of a tapering the bond purchase program.

However, the Fed will now remain reluctant given that lawmakers haven’t found a permanent solution for the debt-ceiling issue.

Earlier this month, Dallas Fed President, Richard Fisher also said that he doubted the scaling down of economic stimulating measures will begin from Oct.  due to the negative impact arising from the shutdown.

“Expectations for tapering have been pushed out and that will be negative for the dollar … The trend is definitely pointing towards $1.40 for the euro,” said Niels Christensen, currency strategist at Nordea in Copenhagen, according to Reuters.

 








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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