A Fed program known as Operation Twist, which was designed to hold down borrowing costs by lengthening the average maturity of the Fed’s holdings, will expire at year-end. The central bank kept its target rate for overnight loans between banks between zero and 0.25 percent since December 2008 to spur economic growth.
The greenback gained 0.1 percent against the euro on Oct. 24 after Fed policy makers announced they would maintain mortgage security purchases of $40 billion a month. Two previous rounds of quantitative easing totaling $2.3 trillion failed to breathe life into the labor market.
U.S. leaders are grappling with a budget-deficit showdown that may push the world’s largest economy into recession. The nation faces a fiscal cliff of $607 billion in automatic spending cuts and tax boosts starting Jan. 1 if lawmakers can’t reach agreement. That would cause the economy to contract 0.5 percent next year, according to the Congressional Budget Office.
In Japan, LDP leader and former premier Shinzo Abe has called for a doubling of the central bank’s inflation goal to 2 percent and “unlimited” easing to end more than a decade of falling prices. The Bank of Japan is due to a hold a monetary policy meeting on Dec. 19-20.
The euro strengthened earlier today as Greece plans to repurchase government bonds with a face value of 31.9 billion euros ($41.6 billion) from private investors including its own banks in a debt buyback to free up aid for the cash-strapped country.
Greece will pay an average weighted price of 33.8 percent of face value for bonds maturing from 2023 to 2042, the Athens- based Public Debt Management Agency said in a statement on its website today.
The 17-nation currency rose as former Italian Prime Minister Silvio Berlusconi offered to drop his plans to run for premier on the condition that Italian Premier Mario Monti agrees to enter the election campaign and lead a coalition of “moderates.”
The euro was already rising on Berlusconi’s comments before the FOMC news, said Chandler of Brown Brothers Harriman.
The euro may strengthen against its U.S. counterpart to $1.3490, its highest level since Dec. 2, 2011, if it closes the week above a so-called retracement level of $1.30, according to Richard Adcock, head of fixed-income technical strategy at UBS AG in London.
The Swiss franc’s rebound from a three-month low against the euro shows that even bank charges for deposits and a lull in Europe’s debt crisis can’t deter demand for the currency.
The Zurich-based Swiss National Bank will keep its franc ceiling at 1.20 per euro tomorrow, according to all 14 analysts in a Bloomberg News survey. While the currency weakened after Credit Suisse Group AG said on Dec. 3 it would set negative rates for franc cash balances, it pared almost all those losses in a three-day run of gains.
China’s yuan weakened versus all but one of 24 emerging markets currencies on speculation the People’s Bank of China is limiting gains in the currency to aid exporters.
The currency depreciated 0.1 percent to 6.2515 per dollar after earlier falling to 6.2568, its lowest level since Oct. 23. This marked the fifth straight day of decline for the yuan, its longest losing streak since May.