Reuters: US Dollar Report: FOREX-Euro dips, losses limited before Fed decision

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro dips, losses limited before Fed decision Jun 20th 2012, 01:51 Tue Jun 19, 2012 9:51pm EDT * Dollar index hovers near 1-month low * Fed may extend Operation Twist, QE3 seen unlikely * Dollar may rise if Fed refrains from QE3 By Masayuki Kitano SINGAPORE, June 20 (Reuters) - The euro eased versus the dollar but clung to much of the previous day's gains on Wednesday, with investors focusing on whether the U.S. Federal Reserve will adopt further monetary stimulus to support the economy's recovery. The euro also gained some support from signs that Greek parties may be close to forming a coalition government, and as Spanish government bonds gained a bit of respite on Tuesday after a recent sell-off. For now, however, the Fed's policy decision due later on Wednesday is taking centre stage. "I think the overwhelming factor is some expectation of Fed stimulus today," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. "Looking at the overnight moves, it's not just the euro that has risen," he said. "We've had a bunch of currencies taking advantage of the softness of the dollar." The euro dipped 0.1 percent to $1.2671, giving back a bit of ground after climbing about 0.9 percent on Tuesday. Resistance for the euro lies at $1.2748, a one-month high struck on Monday after Greek voters backed a pro-bailout party in weekend elections and fears of a disorderly Greek exit from the euro zone receded. Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, cautioned against reading too much into the previous day's rise in the euro. "It's hard for the euro to rise for reasons other than short-covering," Okagawa said, adding that the euro will probably trade in a range roughly between $1.23 to $1.28 over the next month. With Spain's 10-year government bond yields having hit euro-era highs this week, fanning speculation that Spain may need a full-blown bailout, market players expect any bounce in the euro to be limited. The dollar hovered near a one-month low against a basket of currencies ahead of the Fed's decision on Wednesday. The dollar index stood at 81.459 , not far from a one-month low of 81.186 hit on Tuesday. While many market players doubt that the Fed will go so far as to launch another round of quantitative easing, a policy that entails the expansion of its balance sheet via bond purchases, there might still be some disappointment if the Fed holds off from such stimulus, market players say. A more likely scenario is for the Fed to extend "Operation Twist", a programme aimed at pushing down long-term borrowing costs by selling short-term securities to buy longer-term ones. The scheme is now due to end in June. If all the Fed does is to extend "Operation Twist", the dollar could head higher, said Credit Agricole's Kotecha. "There is some, perhaps in our view, misplaced hopes for QE3 today. We believe the Fed will probably extend its Operation Twist, but think QE3 seems unlikely at this stage," said Credit Agricole's Kotecha. "So that could provoke a bit of disappointment if that is the case," he said. The dollar eased 0.1 percent versus the yen to 78.88 yen . There was talk of stop-loss offers below 78.50 yen, while stop-loss bids were said to be lurking at levels above 79.50 yen. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions