FOMC Meeting Minutes Released
Wednesday’s release of the Federal Open Market Committee’s (FOMC) meeting minutes pushed the euro to its highest level against the US dollar since January. The euro to dollar exchange rate was prompted by rising stocks and the belief that the US will be the first to recover from the global recession. The dollar has declined against the euro for the last three trading sessions. At the close of Wednesday’s session the euro was trading at 1.3604.
Fed May Go Over the Present $1.75 Trillion to Purchase More Debt
The FOMC minutes indicated a willingness of the Federal Reserve to go over the $1.75 trillion already committed to purchasing mortgages and other assets. Many traders believe this move could devalue the US dollar since the Fed has to print more money to pay for the increased purchases. Currency exchange rates were affected as investors shrugged off the bad news and moved towards higher yielding and riskier investments.
Better Euro Zone Data
The euro to dollar exchange rate rose 1% to 1.3768, up from 1.3630 on Wednesday. In early forex trading the euro to dollar rate touched 1.3830, the highest since January. The euro fell slightly after a German report showed producer prices falling at the fastest rate in 22 years. Flash Manufacturing PMI and the Flash Services PMI (covering the German, French and Euro-Zone) are expected to show the manufacturing and services sectors contracting at the slowest rate in 7 months.
Japanese GDP Declines
Currency exchange rates were affected after the Japanese Cabinet Office said that Japanese GDP declined 3.5%, the most since 1955. Speculation that the US economy is far from recovering boosted demand for the yen on global currency markets. After falling as low as 94.33 the yen to dollar exchange rate rose slightly to 94.52 late Wednesday. The Bank of Japan starts a two day policy meeting on Thursday but the meeting is not expected to affect currency exchange rates. With stock markets performing well the rise in risk sentiment is expected to continue.
