The dollar is little changed against its major competitors on Thursday, despite the release of several important economic reports. Investors continue to digest the announcements following the conclusion of the FOMC's 2-day meeting yesterday and the comments made by Fed Chairman Ben Bernanke, regarding the looming fiscal cliff.
The U.S. Federal Reserve announced Wednesday that it would replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month. The central bank also said it would continue to purchase additional agency mortgage-backed securities at a pace of $40 billion per month.
In a departure from its earlier pledge to keep interest rates at historically low levels until mid-2015, the Fed will hold off on rate hikes until the unemployment rate falls to 6.5 percent. Policy makers do not see the unemployment rate falling to 6.5 percent until 2015.
Fed Chairman Ben Bernanke warned that Fed support cannot fully offset the downside risks presented by the so-called fiscal cliff. Bernanke expects Congress to reach a deal, but noted that inaction has already resulted in a troubling drop in business confidence.
Retail sales in the U.S. rose by less than expected in the month of November, according to a report released by the Commerce Department on Thursday, with a sharp drop in sales by gas stations partly offsetting strength in other sectors.
The Commerce Department said retail sales increased by 0.3 percent in November following a 0.3 percent decrease in October. Economists had been expecting retail sales to increase by about 0.6 percent.
First-time claims for U.S. unemployment benefits unexpectedly showed a notable decrease in the week ended December 8th, according to a report released by the Labor Department on Thursday.
The report showed that initial jobless claims fell to 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. Economists had expected jobless claims to come in unchanged compared to the 370,000 originally reported for the previous week.
With wholesale energy prices showing a sharp drop in the month of November, the Labor Department released a report on Thursday showing that producer prices for the month fell by more than economists had anticipated.
The report showed that the Labor Department's producer price index fell by 0.8 percent in November following a 0.2 percent drop in October. Economists had been expecting prices to fall by about 0.5 percent.
Business inventories in the U.S. increased in line with economist estimates in the month of October, according to a report released by the Commerce Department on Thursday, although the report also showed a drop in business sales.
The report showed that business inventories rose by 0.4 percent in October following a 0.7 percent increase in September. The increase in inventories matched the expectations of economists.
Finance ministers from the 27 European Union states on Thursday finalized an agreement, giving the European Central Bank more powers to oversee the functioning of banks in the crisis-hit region. The decision came ahead of the two-day EU summit in Brussels starting today.
The ministers plan to make the supervisory system fully operational by March 2014 or 12 months after the entry into force of the legislation, whichever is later, according to statement issued after the meeting.
The Single Supervisory Mechanism (SSM) will be composed of the ECB and national competent authorities. As the chief watchdog, the ECB will be responsible for the overall functioning of the SSM and will have direct oversight of Eurozone banks, but "in a differentiated way and in close cooperation with national supervisory authorities," the ministers said in the statement.
Eurozone finance ministers, collectively known as the Eurogroup, finally approved the release of a second disbursement of bailout funds to Greece on the completion of the government's debt buyback operation.
At its meeting in Brussels on Thursday, Eurogroup authorized the bailout fund, the European Financial Stability Facility (EFSF), to release the next installment for a total amount of EUR 49.1 billion. The disbursement will be made in several tranches.
Greece will receive EUR 34.3 billion in the following days. The remaining amount will be disbursed in the first quarter of 2013.
The dollar fell to over a one-week low of $1.3096 against the Euro on Wednesday. The U.S. currency has remained in a trading range Thursday, around the $1.3070 level.
The buck had been trading in a range around the $1.6130 level against the pound sterling Thursday, but has since broken out to a 2-session high of $1.6083.
The greenback reached a 9-month high of Y83.662 against the Japanese Yen Thursday, but has since eased back to around Y83.500.
by RTT Staff Writer
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