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USD boosted by Fed's Rosengren's comments on QE end - BTMU

FXStreet (Łódź) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ remarks that the USD was supported by Boston Fed president Eric Rosengren's assurance that the Fed should end the bond buying program this month.

Key Quotes

"The US dollar has likely derived some support from comments from Boston Fed President Rosengren who told the FT that the Fed should end QE at the end of this month unless 'something dramatic happens'. He believes that 'there has substantial improvements in labour markets….and as a result I would be pretty comfortable [ending purchases] at the end of the month'."

"His comments suggest that there may be little support for the recent proposal from St Louis Fed President Bullard to delay ending QE by one month. However, Boston Fed President Rosengren did state that it did not make sense to make a big communications revamp at next week’s FOMC meeting."

"In his view the October FOMC statement will have to 'balance the desire to highlight data dependence' with the concern 'this might not be a time that you want to further destabilize financial markets'. He is not bothered by recent financial market volatility but would become more concerned if long-term rates were trending well below our inflation target which would be a 'warning signal' that financial markets have lost confidence in the Fed’s ability to meet their inflation target."

"Those warning signs are already flashing in Japan and Europe. Boston Fed President Rosengren is not a voting FOMC member in 2014 or in 2015."

"The US dollar has weakened modestly so far in October only partially reversing the strong gains recorded in the prior three months. The sharp decline in US yields and pushing back of Fed rate hike expectations has helped to dampen US dollar upward momentum in the near-term. The pick-up in financial market volatility has also triggered a squeeze of elevated speculative long US dollar positions."

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