By TraderVox.com
Tradervox (Dublin) – The Federal Reserve has decided to extend the current Operation Twist which was due to expire this month. In a statement given yesterday after FOMC meeting, the program has been extended with an extra $267 billion, where short term bonds are replaced with longer-term bonds to ensure interest rates on such debt are kept low. After the decision by the FOMC, the dollar dropped against most majors. The Fed also indicated the possibility of doing more if economic situation continues to deteriorate.
The euro from one-month high after German Chancellor Angela Merkel expressed doubts on the possibility of direct bond buys. The 17-nation currency also declined as speculation Greece election signaled progress in dealing with the region’s crisis receded. As the FOMC announced the continuation of Operation Twist, the yen dropped against all of its major counterparts. The extension of the program came as employment growth continued to decline in the country and the unemployment rate remained higher than the target. In the statement, the Fed also said that the household spending has declined in the recent months unlike earlier in the year.
According to Greg Anderson of Citigroup Inc, the Fed has decided to withhold QE3, to give it the ability to deal with any eventualities that may come out of Europe. Similarly, Andrew Busch, called the Fed move as “conservative” as they did not want to do additional quantitative easing without fast looking at more data from Europe and US to confirm the trend of global economy. The Fed also lowered their gross domestic product growth to 1.9-2.4 percent from the previous 2.4-2.9 percent.
The US dollar dropped by 0.2 percent against the euro to trade at $1.2707. However it rose against the yen by 0.8 percent to trade at 79.54 while the Japanese currency dropped by 0.9 percent against the euro to exchange at 101.07 per euro.
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