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Ongoing Fed Speculation sees U.S. Dollar Fall to 1-Month Low

The dollar fell to a one-month low as the exit of former Treasury Secretary Lawrence Summers from the race to lead the Federal Reserve damped bets for an early end to expansionary monetary policy.

The U.S. currency weakened as Summers’s decision fueled speculation the Fed will be more cautious to remove monetary stimulus, which tends to weaken a nation’s foreign exchange. The Federal Open Market Committee will consider whether to slow its $85 billion of month bond-buying at a policy meeting tomorrow and the next day. Australia’s dollar rose to a three-month high and the South African rand climbed to the strongest in five weeks. The Turkish lira jumped the most since May 2010 as the U.S. and Russia agreed on a plan to eliminate Syria’s chemical weapons, boosting demand for higher-yielding assets.

“I would attribute a lot of dollar selling towards Summers’s withdrawal,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “As for the FOMC meeting, any tapering of over $10 billion will be considered fairly aggressive.”

Bloomberg [1]

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