The dollar rose to a five-year high versus the yen after the Federal Reserve officials voted to reduce monthly asset purchases that are seen as debasing the U.S. currency amid signs that economic growth is strengthening.
The U.S. currency gained against most of its major peers after the central bank announced plans to cut its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the unprecedented stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from the worst recession since the 1930s. The Fed acted as a report showed housing starts last month reached a five-year high and the Labor Department reported Dec. 6. the unemployment rate declined to 7 percent in November, the lowest in five years.
“The reason we saw the bounce is that even though markets may have been looking for a stronger commitment on tapering the asset purchase program, the fact that the Fed decided to go with the $10 billion reduction today puts policy on the first step towards the long road towards the exit,” Sireen Harajli, a strategist at Mizuho Bank in New York, said in an interview. “This is contrast to the Bank of Japan, which is expected to add stimulus in April of next year.”