- POSTED: 14 Sep 2013 07:10
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The euro-dollar rate was stable on Friday, days before the US Federal Reserve is expected to begin cutting its US$85 billion stimulus in recognition of a strengthening US economy.
NEW YORK: The euro-dollar rate was stable on Friday, days before the US Federal Reserve is expected to begin cutting its US$85 billion stimulus in recognition of a strengthening US economy.
Despite the prospects for less easy money flooding into the US economy, the euro held onto its recent gains, supported by rising confidence in Eurozone growth.
At around 2200 GMT, the euro was at $1.3292, compared with $1.3299 late Thursday.
The Japanese currency was slightly higher: the dollar bought 99.39 yen, compared with 99.47 a day earlier, while the euro was at 132.11 yen, down from 132.28.
Most analysts said that with months of Fed forewarning, the much-anticipated taper is well-baked into the forex market, with US bond yields having jumped sharply over the past four months.
The only questions will be, just how much will it reduce the monthly bond-buying program, and how fast - the latter a function of how strong the Fed policy makers judge US economic growth.
"At its September 17-18 meeting, we look for the Fed to taper its asset purchases to $70 billion per month from the current $85 billion pace," said Michael Gapen at Barclays.
"Although the average pace of payroll employment growth has slowed in recent months, we still see (the FOMC, the Fed's policy board) as ready to begin slowing balance-sheet expansion, since many participants are likely to view cumulative progress in reducing unemployment since last fall as meeting the hurdle for tapering."
But Kathy Lien of BK Asset Management said some recent weakness in US economic data could put off the taper, and said that underpinned the dollar's relative weakness to the euro recently.
"It is becoming increasingly difficult for the Federal Reserve to justify reducing stimulus next week. A slowdown in consumer spending and sluggish job growth screams of a recovery that is losing momentum," she said Friday.
"We could see additional liquidation of positions in the US dollar ahead of the announcement" of Fed policy on Wednesday, she said.
The British pound continued to rise amid some improved confidence in its economy on a fall in unemployment. The pound rose to $1.5878 from $1.5803 late Thursday.
The dollar meanwhile slipped to 0.9300 Swiss franc from 0.9303 franc.