NEW YORK: The Federal Reserve's expected expansion of its quantitative easing bond-buying Wednesday sent the dollar lower for the third straight day, with the euro almost touching $1.31 before easing back.
The yen meanwhile continued to sag ahead of the December 16 general election, with the opposition Liberal Democratic Party, which wants the Bank of Japan to further ease monetary policy, leading in polls.
In its final policy review of the year, the Fed announced it would replace its Operation Twist bond swapping program with $45 billion per month in straight bond buys, on an open-ended basis, as economic growth still needed the support.
Even as the Fed set new explicit targets for tightening policy -- when the unemployment rate falls to 6.5 percent and inflation prospects top 2.5 percent -- its actions and forecasts implied that would still not happen until 2015.
At 2200 GMT the euro was buying $1.3075, compared to $1.3003 late Tuesday.
The yen sagged as the Japanese election draws near, with the LDP's Shinzo Abe expected to return as prime minister.
Abe, prime minister in 2006-2007, has made strong calls to kickstart Japan's deflation-plagued economy, vowing to impose a three percent inflation target on the Bank of Japan and forcing it to buy bonds -- effectively deficit financing.
He has since rowed back after criticism he was endangering the independence of the central bank. But his comments helped pull down the high yen, delighting exporters hit hard by the surging currency.
The dollar gained to 83.24 yen from 82.51, while the euro moved to 108.85 yen from 107.28 yen.
"It's hard to imagine a change of government will lead to measures that have a real impact on the economy," said Kenji Shiomura, strategist at Daiwa Securities.
"Behind the deflation is a structural problem -- a shrinking population with low birthrates. This problem won't go away."
The dollar slipped to 0.9261 Swiss francs, while the pound gained to $1.6147.
-AFP/ac
New Fed QE sends dollar lower; yen falls ahead of vote
This article
New Fed QE sends dollar lower; yen falls ahead of vote
can be opened in url
http://newsmaturing.blogspot.com/2012/12/new-fed-qe-sends-dollar-lower-yen-falls.html
New Fed QE sends dollar lower; yen falls ahead of vote
