YEREVAN, June 27. /ARKA/. The U.S. dollar rose on Wednesday, with the recent push higher supported by expectations that the Federal Reserve will slow down monetary stimulus later this year.
The euro EURUSD +0.18% fell against the dollar, pushing below $1.30 intraday and fetching $1.3004 in recent trade, down from $1.3095 late Tuesday.
The dollar has more room to gain against the euro because of the “diverging growth stories” in the two economies, said John Doyle, director of markets at Tempus Inc.
“We have said the entire year we don’t see a reason to buy euro above $1.30,” he said.
A potential slowing of the Fed’s $85 billion a month in asset purchases later this year has worried markets since the central-bank’s monetary policy statement was released last week, showing more optimism about the economy. Fed Chairman Ben Bernanke last week indicated the central bank may slow the pace of bond buying as early as this year if the economy continues to improve within its forecasts. The asset purchases have been understood to weigh on the U.S. dollar, and as such, most investors agree that the long-term outlook for the dollar is positive.
The short-term view, however, is more nuanced, said Adam Cole, head of G10 FX strategy at RBC Capital Markets.
A spate of weak economic data could “easily” delay expectations for the first reduction in asset purchases by the Fed, he said. “It won’t be a straight-line dollar appreciation from here,” said Cole. –0–
