Currency Alerts
11/25/2009 3:42 AM ET
(RTTNews) -
In early deals on Wednesday, the dollar extended its yesterday's downtrend against other major currencies as the Federal Reserve raised its growth forecasts for the U.S. economy.
The dollar plunged to a new 7-week low against the yen and 2-week low against the euro and the franc and a 6-day low against the pound.
Federal Reserve officials are increasingly confident the U.S. economic recovery will be durable, but do not see employment or inflation picking up soon, minutes from their November meeting showed yesterday.
The central bank raised its projection for real gross domestic product growth in 2009 to -0.4 percent to -0.1 percent, citing a faster pickup in output than what was originally projected in June. Expectations remained around 2.5 percent to 3.5 percent for 2010 and 3.4 percent to 4.5 percent for 2011.
The Federal Open Market Committee said its policy of keeping rates low might cause "excessive risk-taking" or an "unanchoring of inflation expectations," according to minutes of its Nov. 3-4 meeting.
After their meeting earlier this month, policymakers repeated a pledge to keep rates exceptionally low for "an extended period."
Some officials have argued that the Fed's policy of rock-bottom borrowing costs may be driving investors to lever up their bets by using the falling U.S. dollar to fund their trades.
The FOMC said it did not believe such speculative activity had taken place to date, saying the dollar's decline had thus far been "orderly."
"Any tendency for dollar depreciation to intensify or to put significant upward pressure on inflation would bear close watching," the minutes said.
Last week, policy makers in China and Japan said low U.S. interest rates are fueling surging prices of commodities as well as financial assets in emerging markets.
The U.S. dollar that closed yesterday's trading at 1.0090 against the Swiss franc declined to a 2-week low of 1.0044 in early deals on Wednesday. The next downside target level for the dollar-franc pair is seen at 1.0035.
Most Asian stocks and European stocks advanced today on renewed signs the global economic recovery is gathering momentum. This has also exerted downward pressure on the U.S. currency.
Thus far, the dollar has lost 1.6% against the franc from a 16-day high of 1.0225 hit on November 20.
During early deals on Wednesday, the US dollar fell to a 2-week low of 1.5029 against the euro. This may be compared to Tuesday's closing value of 1.4969. If the dollar weakens further, it may target the 1.505 level.
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