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Published On: Wed, Oct 1st, 2014

US dollar gains as Fed’s monetary path diverges from the ones of ECB and BOJ

The US dollar traded higher against other major currencies on Wednesday, with investors eager to see the anticipated end of the Fed’s bond-purchasing program.

The US dollar traded higher against other major currencies on Wednesday with investors eager to see the anticipated end of the Fed’s bond-purchasing program

The US dollar traded higher against other major currencies on Wednesday, as investors were eager to see if their assumption of the Fed’s ending its bond-purchasing program in October would come into effect. General market expectations favor a rate hike in 2015, whereas monetary policy is expected to remain loose in Europe and Japan. As of 01:05 pm UK time, the EUR/USD is trading at 1.2598.

According to Eurostat report yesterday, the annual inflation rate in the euro area dropped to 0.3%, a five-year low, in September from the August 0.4% figure. Core inflation, measuring the costs of foods, energy, alcohol and tobacco, was 0.7 percent in September against 0.9% for August.

Declining consumer prices raised market expectations that the ECB would add fresh stimulus to put off the looming of deflation in the euro zone, as the bank suddenly introduced record rate cuts last month. Another official data showed the persistence of the euro zone unemployment rate in August, at 11.5%.

In the meantime, the Conference Board’s report showed a decline in its consumer confidence index, to 86.0 for September, compared to 93.4 in August. Analysts’ estimates were for 92.5. The Chicago-area PMI declined to 60.5 in September, from August’s 64.3. Analysts’ expectations were for 61.9.

The USD/JPY rose by 0.10% to trade at 109.75, and the US dollar was up against the Swiss franc by 0.25%, at 0.9572. The USD/GBP is currently quoted at 1.6207.

Next week, the Bank of Japan is to meet and discuss monetary policy. Investors are in anticipation of policy accommodation, and that is why the yen has been struggling against its US counterpart.

The US ADP report today showed 213 000 new jobs were added to the economy, expectations being for 200 000. The ADP report precedes the governmental nonfarm payrolls change, which is keenly awaited by investors and central bankers alike.

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