The dollar fell to a two month low against the euro as the Federal Reserve said it will purchase US$300 billion of longer-term Treasuries, increasing speculation that the central bank is debasing the currency. The dollar fell as much as 2.9% to US$1.3435 per euro, the biggest intraday decline since 17 December. The Federal Open Market Committee stated “to provide greater support to mortgage lending and housing markets, the committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage- backed securities. Moreover, to help improve conditions in private credit markets, the committee decided to purchase up to US$300 billion of longer-term Treasury securities over the next six months.”.
Fed Chairman Ben Bernanke is taking a new approach to monetary policy after it was announced that unemployment had risen to 8.1 percent and economists forecast the economy will shrink through the middle of the year. The Fed also kept the benchmark interest rate at between zero and 0.25 percent and said it will consider expanding the Term Asset-Backed Securities Loan Facility to include “other financial assets”.
There are no significant releases due from the eurozone today. In the US, Jobless Claims and the Philadelphia Fed Manufacturing Survey are due this afternoon.
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