Dollar looks strong as Fed signals exit

Kiwi Declines

New Zealand’s dollar weakened for a second day after the nation’s statistics agency said gross domestic product rose 0.9 percent in the fourth quarter, versus a revised 1.2 percent during the previous three months. The kiwi fell as much as 0.7 percent to 85.02 U.S. cents before trading at 85.37 cents, down 0.3 percent.

The dollar has gained 0.8 percent in the past six months among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen slid 2.6 percent, while the euro gained 2.9 percent.

Yields on Treasury two-year notes increased one basis point today, or 0.01 percentage point, to 0.43 percent after climbing seven basis points yesterday.

The policy-setting FOMC after a two-day meeting discarded a jobless-rate threshold for considering when to increase borrowing costs and said it will look at a wider range of data. The benchmark interest-rate target has been zero to 0.25 percent since 2008.

‘Six Months’

Policy makers reduced monthly bond-buying by $10 billion to $55 billion and said the purchases will be slowed in “further measured steps.” Economists surveyed by Bloomberg before the meeting forecast officials would announce an end to the program in October.

Yellen said she saw a “considerable time” between the end of the stimulus and the first rate increase, meaning “around six months or that type of thing.” She spoke at a press conference after presiding over her first policy meeting.

Fed officials estimated the interest rate will be 1 percent at the end of 2015 and 2.25 percent a year later. In December, they projected 0.75 percent and 1.75 percent.

The Bloomberg Dollar Spot Index, which monitors the U.S. currency against its 10 major counterparts, rose 0.2 percent to 1,021.60 after reaching 1,023.65, the highest since Feb. 13. It jumped 0.8 percent yesterday, the most since August.

“The statement and forecasts contained unexpected hawkish elements, which Yellen didn’t dispel,” said Valentin Marinov, head of European Group of 10 currency strategy at Citigroup Inc. in London. “Euro-zone assets no longer look cheap,” and it “points to growing downside risks for euro-dollar.”

U.S. Sanctions

The ruble erased gains as U.S. President Barack Obama ordered sanctions on 20 senior Russian officials and a bank in the standoff over Russia’s annexation of Ukraine’s Crimea region. The financial firm is Bank Rossiya in St. Petersburg, which officials said has $10 billion in assets and is the 17th largest bank in Russia. Obama imposed sanctions earlier on 11 individuals.

The currency was little changed at 42.3420 against Bank Rossii’s target basket of dollars and euros.

France leapfrogged the U.S. as the top destination for the Russian central bank’s investments, dethroning America for the first time. The amount of reserves in French assets, including government bonds and deposits, rose to 32 percent as of June 30, a jump of 4 percentage points from three months earlier, the central bank said today in a quarterly report on its website. Bank Rossii decreased investments in the U.S. to 29.7 percent, from 33.8 percent.

 
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