Dollar rangebound after Fed action

TOKYO, Nov 4, 2010 (AFP) - The dollar moved narrowly against other currencies in Asia on Thursday in the wake of the Federal Reserve's announcement of measures to energise a sluggish US economy, dealers said.

The dollar fetched 81.13 yen in Tokyo morning trade, flat from late Wednesday in New York, where the greenback rose as investors adjusted dollar-short positions after the Federal Reserve's meeting.

The euro stayed close to nine-month highs against the greenback at 1.4103 dollars, compared with 1.4130 dollars in New York, edging lower on lingering concerns about the health of the eurozone economies.

Against the yen the euro edged down to 114.46 yen from 114.65.

The dollar had lost ground against its rivals after the Fed said it would purchase 600 billion dollars worth of bonds by the middle of next year to help safeguard the recovery, in what is known as quantitative easing.

The Federal Open Market Committee (FOMC) said it would buy up new Treasury debt at a rate of around 75 billion dollars a month, a scale not seen since the depths of the economic crisis.

While the size of the asset-purchase scheme was slightly bigger than expected, the move had been anticipated by traders with the dollar falling steadily against rivals in the weeks leading up to Wednesday's move.

The Australian dollar hit a new post 1983-float high of 1.0057 US dollars Thursday after the announcement, before easing back slightly.

The "Aussie" first breached parity with the US currency on October 15 and was boosted this week after the central bank unexpectedly raised interest rates to 4.75 percent, significantly above other advanced countries.

While the US dollar recovered from initial losses, the Fed's easing stance likely puts the greenback on course for longer term weakness, said analysts.

"With the Fed committing to 'adjust the program as needed' to ensure the sustainability of the US recovery, markets are already speculating the Fed may yet have to dole out more stimulus," noted John Kyriakopoulos at National Australia Bank.

The dollar was likely to resume its decline against the yen, Kenichi Nishii, senior dealer at Bank of Tokyo-Mitsubishi UFJ told Dow Jones Newswires.

"It's a matter of time" before it falls below 80 (yen)," he told Dow Jones Newswires. The dollar's low since World War II was 79.75 yen hit in April 1995.

But Nishii said such a development was unlikely this week because "investors will stand on the sidelines ahead of" the Bank of Japan's two-day policy board meeting to be wrapped up Friday. 

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