Tapering Speculations – Dollar Declines for Third Day as Fed Decides on Tapering Pace

Good day forex traders and readers.

I hope you are having a great week making money from forex! For folks who are new to the site or regulars who don’t really care what I have been cautioning so far ( ha ! ) , this may be the week of volatility craziness!

Speculations are running wild that the US Federal Reserve decision to taper their quantitative easing programme will be announced this week. While we were expecting a risk aversion scenario whereby the US dollar strengthens, it appears that the reverse is happening. We know forex can be very unpredictable at times and hence as per my previous forecast, caution is highly recommended this week! Read more about the currencies situation in this Bloomberg report below :

Euro & U.S. Dollar

The dollar declined, trading at almost the lowest in a month, before Federal Reserve policy makers decide whether to reduce monetary stimulus at a two-day meeting starting today.

The euro strengthened for a second day against the dollar and yen after an industry report showed German investor confidence climbed more than forecast, adding to evidence Europe’s largest economy is gaining momentum. India ’s rupee fell the most in two weeks on speculation a reduction in U.S. stimulus may hurt demand for emerging-market assets.

“The market has been pricing in tapering and it’s likely to come sooner or later,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said in a phone interview. “It’s reasonable to expect they’ll emphasize the difference between quantitative easing and interest-rate policies. They’ll maintain a strong emphasis on that.”

The Bloomberg U.S. Dollar Index, which tracks the greenback against the performance of a basket of 10 major currencies, dropped 0.1 percent to 1,020.14 as of 11:05 a.m. New York time, after falling to 1,017.30 yesterday, the lowest level since Aug. 12.

The dollar fell 0.1 percent to $1.3349 per euro after reaching $1.3386 yesterday, the weakest level since Aug. 28. The U.S. currency rose 0.3 percent to 99.36 yen while the 17-nation euro added 0.4 percent to 132.60 yen. Real Climbs

Brazil ’s real climbed 1 percent to 2.2614 per dollar, the strongest on a closing basis since July 26, after the nation’s central bank rolled over foreign-exchange swap contracts worth $1.97 billion to support the currency in an effort to curb inflation.

Australia ’s dollar advanced 0.4 percent to 93.57 U.S. cents after reaching 93.94 yesterday, the strongest since June 19. The New Zealand dollar climbed for a second day, gaining 0.8 percent to 82.39 cents. It touched 82.30 […]

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