USD Steady After Feds Cuts Bond Buying

by on July 30, 2014 7:33 pm BST

The dollar remained higher after the Federal Reserve said slack in the labor market persists even as the economy is picking up, and it continued to trim monthly asset purchases.

The US currency rose to a four-month high earlier as the economy grew more than forecast in the second quarter. The greenback strengthened for a ninth day versus the yen as the yield spread between Treasury two-year notes and similar maturity German bunds reached the most in more than seven years. The euro slid to an eight-month low as German inflation slowed.

“A range of labor-market indicators suggests that there remains significant underutilization of labor resources,” the Federal Open Market Committee said today in a statement in Washington. “The likelihood of inflation running persistently below 2 percent has diminished somewhat.”

Policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the purchase program in October. Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal.

The dollar advanced earlier as GDP rose at a 4 percent annualized rate after shrinking 2.1 percent from January through March, Commerce Department figures showed today in Washington.