Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Dollar mixed after Fed launches jump-start

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The U.S. dollar weakened against the euro Wednesday after the Federal Reserve announced a widely anticipated plan to support the economy.

The central bank said it will buy $600 billion in long-term Treasuries over the next eight months. The Fed also announced it will continue to reinvest an additional $250 billion to $300 billion in Treasuries with the proceeds of its earlier investments.

The goal of the purchases, part of a policy known as quantitative easing, is to put downward pressure on long-term interest rates and pump money into the economy. The plan is also intended to ward off deflation, a debilitating cycle of falling prices and demand.

The Fed also left the federal funds rate, a benchmark for interest rates on a variety of consumer and business loans, at a historic low near zero where it's been since December 2008.

The dollar has been under pressure for weeks as investors anticipated the move, which could erode the value of U.S. currency by adding to the money supply.

But the move also sent a signal to investors that the Fed is willing to act as a nursemaid to the economy as long as it keeps struggling.

"This move was a very definitive message to the market that they will do what ever it takes to support assets prices," said Boris Schlossberg, currency strategist at trading firm GFT. However, he added that the dollar selling was not excessive because the Fed's announcement had been expected.

The central bank said it would buy Treasuries in $75 billion monthly increments, running through the second quarter of 2011.

Many market participants had expected the Fed to buy a total of $500 billion worth of Treasuries in $100 billion portions over an unspecified time frame.

"The net take away of this is that asset prices will be supported," Schlossberg said. "That means the dollar will remain weak against high risk currencies such as the euro, the British pound and the Australian dollar."

The dollar was down 0.2% versus the euro at 1.4052 and fell 0.4% versus the pound to $1.6091. But the buck gained ground against the Japanese yen, rising 0.8% to ¥81.36.

Schlossberg said the dollar is gaining against the yen because investors are expecting the pace of the U.S. recovery to pick up in the fourth quarter.

Despite a dour economic assessment from the Fed, reports on Wednesday showed some improvement in the U.S. job market, services sector and factory orders.

Looking ahead, investors will now turn their attention to Friday's monthly jobs report from the Labor Department.

Economists expect it to show that the economy added 60,000 jobs in October, after employers cut payrolls in September.

The unemployment rate, however, is expected to remain unchanged at 9.6%, according to consensus estimates from economists surveyed by Briefing.com.  To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.62%3.69%
15 yr fixed2.77%2.80%
5/1 ARM3.12%3.07%
30 yr refi3.61%3.69%
15 yr refi2.76%2.83%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 15,973.84 313.66 2.00%
Nasdaq 4,337.51 70.67 1.66%
S&P 500 1,864.78 35.70 1.95%
Treasuries 1.75 0.10 6.33%
Data as of 4:36pm ET
Company Price Change % Change
Bank of America Corp... 11.95 0.79 7.08%
General Electric Co 28.26 0.81 2.95%
Cisco Systems Inc 25.11 0.43 1.74%
Chesapeake Energy Co... 1.59 -0.19 -10.67%
Freeport-McMoRan Inc... 5.53 0.64 13.09%
Data as of Feb 12

Sections

Investors need someone they can bring home to mother instead of bad boys (or girls) that may make their heart beat faster. Boring beats bold in this market. Here are 10 dependable stocks we love. Southwest (ticker symbol: LUV) is one. More

Cheap oil and slow global growth may not be the only culprits of the global market turmoil. There's growing concern that central banks are spooking the markets too. More

Eastern Illinois University laid off 198 staff members this week, and the college president is blaming the state government. More