USD Drops on Fed Start of Taper Delay Expectations

Global shares hovered at five-year highs on Monday while the dollar edged up against the yen as investors looked ahead to a deluge of U.S. data for clues on when the Federal Reserve will begin scaling back its stimulus.

Many in the markets think the Fed will be wary of trimming its $85 billion-a-month bond-buying program, which has supported riskier assets like shares, until the economic impact of a 16-day partial U.S. government shutdown becomes clearer.

“We’re opening with a slightly positive tone …, on the back of last week’s decision to extend (U.S. fiscal) deadlines which is seen pushing back tapering from the Fed, a view which continues to support risky assets,” said Richard McGuire, senior rate strategist at Rabobank.

European shares .FTEU3 touched a fresh five-year high in early trade, though moves were limited ahead of the U.S. data, which begins with home sales numbers on Monday and includes the keenly watched non-farm payrolls report on Tuesday.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza