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Forex News: Dollar Spiking Higher After Fed Reveals Plans To

Dollar Spiking Higher After Fed Reveals Plans To Reduce Its Portfolio

09/20/2017 - 14:54:00 (RTTNews)

(RTTNews) - The dollar has spiked sharply to the upside against all of its major rivals after the Federal Reserve revealed its policy decision. The Federal Reserve on Wednesday maintained its benchmark interest rate at a range of 1% to 1.25%.

As expected, the Fed said it will begin shrinking its bloated $4.5 trillion portfolio in October by allowing $10 billion in bonds to mature without replacing them.

The portfolio includes Treasury and mortgage-backed securities that were acquired during and after the 2007-09 financial crisis in a successful program to prop up the economy.

The amount of reductions will gradually rise over the course of the following year to maximums of $30 billion per month for treasuries and $20 billion per month for agency securities, and will remain in place through the process of normalizing the size of the Fed's balance sheet.

Hurricanes are unlikely to materially impact economy in medium term, according to the Fed's statement.

"Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low," the Fed said.

With strained supply levels continuing to subdue overall activity, the National Association of Realtors released a report on Wednesday showing an unexpected decrease in existing home sales in the U.S. in the month of August.

NAR said existing home sales slumped by 1.7 percent to an annual rate of 5.35 million in August after tumbling by 1.3 percent to a rate of 5.44 million in July.

The continued decrease surprised economists, who had expected existing home sales to edge up to an annual rate of 5.46 million.

The dollar slipped to over a 1-week low of $1.2032 against the Euro Wednesday, but has since spiked to around $1.19.

Germany's producer prices increased at the fastest pace in three months in August, Destatis reported Wednesday. Producer prices increased 2.6 percent year-on-year in August, faster than the 2.3 percent rise seen in July.

The buck dropped to a 3-month low of $1.3653 against the pound sterling Wednesday, but has since jumped to around $1.3485.

UK retail sales grew the most in four months in August as consumers spend more despite higher inflation, vindicating a possible stimulus withdrawal in the months ahead.

According to data published by the Office for National Statistics, the retail sales volume including auto fuel advanced 1 percent in August from July, the biggest growth in four months, exceeding the expected rate of 0.2 percent and July's increase of 0.6 percent.

The greenback slid to a low of Y110.997 against the Japanese Yen Wednesday, but has since broken out to around Y112.325.

Japan posted a merchandise trade surplus of 113.642 billion yen in August, the Ministry of Finance said on Wednesday. That beat forecasts for a surplus of 104.4 billion yen, although it was down from 418.8 billion yen in July.

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