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Dollar struggles despite historical end to QE

The dollar strength seen in August and September has come up against some stiff resistance in October and even yesterday’s much better than expected US consumer confidence numbers were not enough to attract dollar buyers, whilst the data did lead to further risk appetite for to indices with the Dow closing back above the 17,000 level. The index has now bounced 5.4% since hitting a multi month low only days ago.

Overnight the Kiwi has seen a bit of strength following better than expected business confidence data, but this is unlikely to cause any surprises come the RBNZ’s interest rate decision later tonight. NZDUSD has found some support for the second time, around and just below the 0.7800 level and is trading at 0.7935 at the time of writing, but that bounce could be short lived as the RBNZ continues to play down the currency and US tapering is due to complete today.

It’s FOMC decision day and this will be keenly watched as we mark a historical end to the Federal Reserve’s massive QE III program. Whilst there’s no press conference that follows the decision, the key element to watch will be the statement to see if there’s any hint of when rates will start to rise. But hopes maybe dashed as we can expect the dovish tone to remain, in particular the inclusion of the phrase “considerable time”, so a reassertion of dollar strength might take some time yet.

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