09.23.11

USD grows on Fed Bond Purchase, while AUD falls against USD

The trading market has evolved in a rather unexpected way today, due to the fact that the USD started to grow against most of its major counterparts, managing to reach such growth levels as to cause the AUD to fall below parity. This comes as a reaction of the Federal Reserve Bank’s decision of purchasing bonds, which has immediately increased the interest for the US Dollar.

The US Dollar started to widely grow after the moment when the Federal Reserve Bank announced its decision of purchasing long-term securities. This decision caused an instant demand for safe-haven currencies, including the US Dollar, which completely took advantage by the situation. The Federal Open Market Committee decided to maintain the federal funds rate at the value of 0 to 0.25 percent. In its statement, the FOMC said the following: “The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.”

But the news is not good on a long term bases as the fact that the prospects for the interest rates are low on a long-term bases while there is an obvious expansion of the long-term securities buying programme indicates the fact that the Fed has a very negative outlook for the US economy. Nonetheless, at this very moment, the US Dollar took advantage of the risk aversion which arose after the FOMC statement and grew on safe-haven demand. The Dollar Index went up by 1 percent during today’s trading, reaching the value of 77.803 in New York.

Based on these facts, the US Dollar gained territory against most of its major counterparts. The EUR/USD pair decreased from 1.3571 to 1.3552. The GBP/USD pair fell from the value of 1.5498 to the one of 1.5460, while the USD/JPY pair grew from the value of 76.44 to the one of 76.75.

On the other hand, the Australian Dollar registered losses today, especially against the US Dollar, against which the Aussie fell below the parity level. This was due to the signs which indicated the slowdown of the manufacturing field in China and to the decrease of the stocks. These elements have generated a weaker demand for the Australian Dollar.

The HSBC preliminary manufacturing Purchasing Manager’ Index decreased to the level of 49.4 during the month of September, falling from the 49.9 level which has been registered in August. As a matter a fact, this is the lowest level registered in the previous two months. As well, the MSCI Asia Pacific Index of stocks decreased by 4.1 percent, while the Stoxx Europe 600 Index fell by 4.2 percent.

Based on these facts, the Australian Dollar lost territory against most of its major counterparts. The AUD/USD pair decreased below parity level, falling from the value of 1.0043 to the value of 0.9774, after previously reaching the daily low of 0.9735.

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