Dollar Up On Fed Stimulus-Cut, Emerging-Markets Selloff Boost Haven Demand

January 30, 2014

Frankfurt-Germany (Jan 30)  The U.S. dollar edged sharply higher in Europe Thursday, on safe-haven demand as a sell-off in emerging market assets weighed on investor sentiment, while Federal Reserve`s decision to cut its monthly bond purchases by another $10 billion boosted gains.

The U.S. dollar moved impressively off lows and traded mixed against most major currencies after the Federal Reserve left its benchmark lending target unchanged at 0.00%-0.25% and trimmed $10 billion from its $75 billion monthly asset-purchasing program for the second time to spur recovery.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was little changed in Europe, trading at 80.96 as of 12:54 after hitting a session high of 81.00.

Later today, the U.S. is to publish preliminary data on fourth-quarter economic growth, along with a weekly report on initial jobless claims and data on pending home sales. Data today may show U.S. Gross Domestic Product (GDP) expanded at a 3.2 percent annualized pace in the fourth quarter, slower than 4.1 percent expansion a year ago.

The dollar inched up against the yen, pushing the USDJPY pair up to trade at ¥102.314 based on the four-hour chart, after opening at ¥102.249. The pair so far hit a session high of ¥102.398.

The pair will most probably extend gains if it managed to stabilize above 102.550 resistance level. While stability below 101.840 support level will clear the way for a downside movement.

Euro weakens despite positive fundamental releases

Euro extended decline for a fifth straight day, weighed by stronger U.S. dollar, despite the evident optimism in the euro zone about its economic prospects continued to improve in January.

Euro-area economic confidence increased for a ninth month in January, adding to signs that recovery in the euro area is gathering momentum. Economic sentiment in the 18-nation currency bloc strengthened by 0.5 points to 100.9.

Based on the four-hour time frame, the euro attempted to rebound after plunging to the downside earlier in the session, driving the EURUSD pair to trade around $1.36050, while recording the highest level of $1.36059 and lowest of $1.35854.

Euro gains were capped by a stronger dollar demand, despite positive growth data from Spain, where data showed economic recovery picked up the pace in the fourth quarter, growing at 0.3% as expected- the second quarterly positive reading after a two-year recession .

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