Dollar down as Fed announces stimulus

The dollar fell broadly on Thursday, dropping to a seven-month trough versus the yen and a four-month-low against the euro as the Federal Reserve revealed it was to inject further money into the flagging US economy.

The Fed announced that it would purchase $40bn of mortgage debt a month and will keep buying this and other assets until there is a pick-up in the US employment rate. Officials from the US central bank also said that interest rates were likely to stay the same until at least the middle of 2015. It had earlier indicated that they would remain at their record-low level until the end of 2014.

Faros Trading managing director Brad Bechtel described the Fed’s announcement as “bullish” for risk assets, meaning traders were happy to sell the greenback against almost everything, especially the Australian dollar.

The euro fell to a low of $1.2856 after the announcement, but later climbed to a session high of $1.3001. Bechtel went on to say that investors are comfortable offloading the single currency at $1.30, and that the currency is likely to be lower by the end of September due to the ongoing debt crisis in the region. The euro was last seen at $1.2984, a daily rise of 0.7 per cent and the highest it has been at since 9 May.