Dollar spring back in New York

The dollar rose against the euro for the first time in five days on Wednesday after the Federal Reserve gave no hint of providing further economic stimulus, though it held on to its position of keeping interest rates low for an extended period. Expectations of another round of stimulus through asset purchases, called quantitative easing, grew in recent weeks as weaker-than-expected data, ranging from the manufacturing sector to the jobs market, showed the recovery was losing steam.
The Fed said the pace of the US economic recovery was proceeding more slowly than it had expected, but said growth should pick up soon. "There was a glimmer of hope that at some point the Fed would turn to QE3, but Bernanke pushed that hope very far off into the future," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
"QE3 would have been very negative for the dollar." Greece's debt crisis continues, however, to dog the euro. The single currency was weighed by profit-taking after Tuesday's vote of confidence in the Greek government, which removed one obstacle in Greece's bid to secure the next round of aid in its bailout package but left investors bracing for more challenges, including a crucial decision on Greece's austerity plans.
In late afternoon New York trading, the euro was down 0.4 percent at $1.43560, off a high of $1.44424. "We're not walking into a nightmare in the eurozone, but it's not a dream scenario either. It's all a series of hurdles that we have to go through before the market can get much comfortable," said Ken Dickson, investment director of currencies, at Standard Life Investments in Edinburgh.
The Greek cabinet approved on Thursday draft legislation spelling out the details of its five-year austerity plan, a condition to receive more EU-IMF funding, a Greek government official said. Against the yen, the euro was down 0.3 percent at 115.28 yen. The euro was 0.4 percent weaker against the Swiss franc to 1.2056 francs. The dollar was 0.1 percent higher against the yen to 80.300 yen. The dollar index, which tracks the greenback's performance against a basket of major currencies, was up 0.4 percent at 74.834, but fell off last week's peak of 76.015.