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Sep 24, 2013, 01.01 AM IST | Source: Investing.com

Forex - Dollar trims losses, stays weak on Fed support for stimulus

Forex - Dollar trims losses, stays weak on Fed support for stimulus

Investing.com - The dollar took back earlier losses stemming from a Federal Reserve official's defense of keeping stimulus programs in place on Monday though gains were short lived.

Comments from European Central Bank President Mario Draghi on considerations to provide low-interest loans to euro zone banks gave the dollar some support .

In U.S. trading on Monday, EUR/USD was down 0.20% at 1.3496.

The euro softened and the dollar firmed after Draghi said earlier that the European Central Bank may provide financial institutions with a new round of low-cost loans known as long-term refinancing operations to ensure interest rates stay low and inflation in target.

In 2011, the ECB began lending out EUR1 trillion in long term refinancing operations to spur recovery.

Elsewhere, data released earlier showed that the euro zone preliminary manufacturing purchasing managers' index fell to 51.1 in September from a final reading of 51.4 in August. Analysts were expecting the index to rise to 51.8.

Conversely, the euro zone services PMI rose to 52.1, its highest level since June 2011, from 50.7 in August and well above expectations for a reading of 51.1.

Across the Atlantic, the greenback came under pressure earlier after New York Federal Reserve President William Dudley defended the U.S. central bank's decision to leave its USD85 billion in monthly asset purchases unchanged.

"In my view, the economy still needs the support of a very accommodative monetary policy. Adjustments to that policy need to be anchored in an assessment of how the economy is actually performing, how financial conditions are evolving, and how this affects the longer-term outlook and the risks around it," Dudley said in prepared remarks of his speech.

"Our decisions on how to adjust our policy tools—for example, the pace of asset purchases and forward guidance with respect to the level of short-term rates—must be rooted in the ongoing flow of information that informs our judgments about the prospects for a sustainable recovery."

Many market watchers were expecting the Fed to trim the amount of assets it purchases each month by about USD10 billion, which would have strengthened the greenback.

The greenback was down against the pound, with GBP/USD up 0.30% at 1.6053.

The dollar was down against the yen, with USD/JPY down 0.60% at 98.78, and down against the Swiss franc, with USD/CHF trading down 0.04% at 0.9104.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.26% at 1.0280, AUD/USD up 0.49% at 0.9444 and NZD/USD trading up 0.17% at 0.8376.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.01% at 80.53.








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