Dollar keeps dropping as investors await Fed move

AP News
Posted: Oct 13, 2010 3:40 PM
Dollar keeps dropping as investors await Fed move

Investors continued selling dollars Wednesday because of increasing expectations that the Federal Reserve will launch a big program of bond purchases this year to support the economy.

Minutes from the bank's September meeting released Tuesday afternoon raised hopes that the Fed was close to enacting a new bond-buying program, perhaps as soon as early November. That would send U.S. interest rates even lower than they are already in hopes of encouraging borrowing. However the lower rates would also push the value of the dollar down against other currencies.

The euro rose to $1.3965 from $1.3914 in late trading in New York. While investors think the Fed's future moves will weaken the dollar, the European Central Bank will likely pursue a path that would support the euro, said Brown Brothers Harriman analysts in a research note Wednesday.

The ECB was likely to end special measures to support financial markets, boosting interest rates, they wrote. Higher rates make assets bought in euros more appealing to investors.

The British pound also gained to $1.5893 from $1.5778, while the dollar dipped to 81.77 Japanese yen from 81.88 yen.

The dollar continues to circle just above its most recent 15-year low of 81.40 yen struck on Monday. The Japanese currency is stronger now than it was before the Bank of Japan intervened in foreign exchange markets to weaken the yen. Japan is just one of a string of countries that have moved recently to curb currency gains.

A weaker currency tends to support exports. Export growth had helped many countries, including the U.S., in recovering from the recession.

In other late trading Wednesday, The dollar dropped to 1.0037 Canadian dollars from 1.0109 Canadian dollars, hitting a six-month low at 1.0012 Canadian dollars ealier in the day. The dollar edged up to 0.9597 Swiss francs from 0.9578 Swiss francs.