Forex Market Review – Dollar fluctuates after Fed policy statement

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Euro was volatile after the Federal Reserve Policy meeting, initially jumping against the dollar but then soon dipped  before steadying again. The Fed extended monetary stimulus as expected by markets, in order to keep the U.S. recovery from stalling. The Fed extended Operation Twist and did not announce more aggressive measures  such as QE3. But Bernanke said later in his news conference that he is prepared to take further steps if necessary to promote growth and support the labour market. Operation Twist helps lower long-term interest rates.


EURUSD fluctuated after the Fed policy statement, first falling to a low of 1.2637 then jumping back up to 1.2741 as Bernanke spoke, and ended the U.S. session at 1.2682. Euro recovered after Merkel said at a press conference the European Financial Stability Facility could possibility be used to buy euro zone sovereign bonds on the secondary markets.


GBPUSD initially dipped to a session low of 1.5650 and erased some losses before falling back towards the end of New  York trading to 1.5702.


Dollar outperformed against the yen, with USDJPY surging from a U.S. session low of 78.87 to a high of 79.69.


AUDUSD spiked to a 6-1/2 week high  after the Fed statement, hitting  1.0222, the highest since  May 4 before easing to 1.0146.