Forex - Dollar firms on fresh Fed taper talk, U.S. fiscal uncertainty

Written By Unknown on Sabtu, 21 September 2013 | 08.10

Investing.com - The dollar firmed against most major currencies on Friday after a Federal Reserve official said the U.S. central bank can't rule out an October start date to begin tapering stimulus measures.

Brewing fears of a fiscal impasse in the U.S. sent investors seeking safety in liquid greenback positions as well.

In U.S. trading on Friday, EUR/USD was down 0.09% at 1.3518.

The Federal Reserve could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program, St. Louis Fed President James Bullard said Friday.

On Wednesday, the Fed decided to leave the stimulus program unchanged, surprising many who were expecting a decision to trim the amount of assets purchased a month by USD10 billion or even more.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not due to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December, though don't rule out action next month if economic indicators improve before then.

'This was a close decision here in September, so it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October,' Bullard told Bloomberg Television.

'It's possible, but I'm not saying it will happen. You have other meetings after that.'

Elsewhere in the U.S., the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival in the Senate, not to mention a presidential veto, the posturing sparked fears of brinkmanship and inaction that sent investors seeking safety in the dollar ahead of a fiscal showdown brewing in the U.S.

Failure to agree on debt-ceiling solution could result in a government shutdown in October, and the growing uncertainty sent investors snapping up safe-haven dollar positions.

Meanwhile in the euro zone, investors braced for the outcome of Germany's general election on Sunday, with Chancellor Angela Merkel looking to secure a third term.

The greenback was up against the pound, with GBP/USD down 0.09% at 1.6018.

Official data showed that U.K. public-sector net borrowing rose less than expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts were expecting public-sector net borrowing to rise by GBP12 billion last month.

The dollar was down against the yen, with USD/JPY down 0.08% at 99.38, and flat against the Swiss franc, with USD/CHF trading up 0.01% at 0.9107.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.35% at 1.0301, AUD/USD down 0.39% at 0.9403 and NZD/USD trading up 0.00% at 0.8376.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.11% at 80.57.

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