The Australian dollar bounced back from its three-year low against the green back on Monday just before the Christmas-holiday trade.
The aussie traded 0.28% higher against the US dollar at %0.8942 at the time of writing, and traded flat against the 17-bloc euro currency at a$1.5302 at the same time on Monday.
The Australian currency dropped to its lowest level since 2010 last week, following the Fed’s decision to decrease its $85 billion monthly asset purchases by $10 billion starting from January.
“The FOMC tapered the pace of asset purchases by $10 billion per month, but strengthened its forward guidance about the conditions for future rate hikes. We now expect the FOMC to taper by $10 billion per month through September 2014, with a final $15 billion reduction at the October 2014 meeting,” analysts from Barclays Capital predicted.
Analysts were surprised by the final revision of the US GDP, showing an advance of 4.1% at an annual pace, surpassing analysts’ prediction of a 3.6% rise. The second-quarter data remained unrevised at 2.5%, reports from the Department of Commerce confirmed on December 20.
As the health of the world’s largest economy is getting stronger, members of the Federal Reserve decided to begin to reduce the central bank’s asset-purchases at their final meeting on December 18.
The US Central bank announced it would reduce its $85 billion monthly asset purchases to $75 billion starting January next year.
Boston’s Federal Reserve’s President Eric Rosengren voted against the Fed’s decision to reduce its bond purchases. Rosengren suggested the decision to taper should have been delayed until March 2014.
“The U.S. economy remains far from the 5.25 percent unemployment rate that I believe is consistent with full employment, and total PCE inflation, at only 0.7 percent, is well below the Federal Reserve’s inflation target of 2 percent,” Rosengren said.
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