Dollar slides broadly; talk of further easing weighs

By Vivianne Rodrigues

NEW YORK (BestGrowthStock) – The dollar fell broadly on Tuesday as a decline in U.S. consumer confidence to the lowest level since February increased expectations the Federal Reserve will print money to buy assets.

The euro surged to a five-month high against the greenback, smashing a key resistance level and option barriers on its way up, a signal of further gains in the single euro-zone currency.

The yen also firmed, pushing the dollar to below 84 yen, its weakest since Japan intervened in the foreign exchange market (Read more about international currency trading. ) two weeks ago to halt its currency’s rise.

The Federal Reserve is likely preparing a fresh round of quantitative easing measures to announce at the end of its November 2-3 meeting, a report by influential hedge fund adviser Medley Global Advisors said on Tuesday, a source told Reuters.

The Wall Street Journal reported that the Fed is weighing a more open-ended, smaller-scale bond buying program.

“The trend is still dollar-negative. Some kind of quantitative easing is probably coming up,” said Kaz Shirai, a forex interbank trader at Union Bank of California in Los Angeles.

“There’s also been talk on Wall Street that $1 trillion may be needed — and that’s still a lot of money. That’s pushing 10-year yields down, which helps dollar sellers,” he added.

On Wall Street, U.S. stocks (Read more about the stock market today. ) rose on the expectations the Fed will pump more money into the economy, which Shirai said brought out more risk-takers, benefiting the euro and higher-yielding currencies such as the Australian dollar.

“We’re making a new high on the euro,” he said, helped by some option-related buying.

The euro earlier broke a well-flagged resistance at $1.3511, the 50-percent Fibonacci retracement of its fall from $1.5145 last November to its June low around $1.1876.

The euro rose as high as $1.3595, according to electronic trading platform EBS, taking out barriers at $1.3525. It last traded at $1.3588, up almost 1 percent.

Gains in the euro accelerated after the Conference Board, an industry group, reported weaker-than-expected U.S. consumer confidence data for September.

According to CitiFX, the next stop in euro/dollar is likely the 55-week moving average that comes in at $1.3630. The bank said there is solid resistance above that level, specifically at $1.3670-$1.3740, where the highs from December 2004, April 2007, and March 2009 converge.

“It really is a ‘classic QE day,'” said Tom Fitzpatrick, a currency analyst at Citigroup. “Bonds rally, equities rally, the dollar goes down and gold hits new highs. At this point, that is what’s driving the markets.”

EURO AT $1.39?

Brian Dolan, chief currency strategist at in Bedminster, New Jersey, said over the medium term, he is looking for a rise in the euro to between $1.38 and $1.39.

“There are a few stopping points in between ($1.35 to $1.38) but it could easily happen over the next few days as the euro has gained nearly 5 percent over the last week or so. The euro is the standout here.”

Analysts said gains in euro/sterling also helped the euro advance against the dollar. The euro surged against sterling after Bank of England policy maker Adam Posen said the British central bank should start pumping more money into the economy.

The euro rose 1.2 percent against sterling, to around 85.97 pence.

Against the yen, the greenback hit a low of 83.68 yen, according to electronic trading platform EBS. The dollar last traded at 83.87 yen, down 0.5 percent on the day.

With dollar/yen trading near the lows, investors were on alert about possible intervention by Japan to stem the yen’s strength.

Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said the pair would need to go lower in order for Japanese authorities to step in.

Dollar slides broadly; talk of further easing weighs