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Wednesday, Feb 20, 2013 9:45 PM UTC

Dollar rises as Fed expresses doubt on stimulus

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Topics: From the Wires,

NEW YORK (AP) — The dollar rose Wednesday after a report from the Federal Reserve hinted that the central bank may be closer to slowing or ending its efforts to support the economy.

The Fed released minutes from its January meeting disclosing that several policymakers said they were concerned about the risks of the Fed’s policy of buying bonds to keep interest rates low. The bond-buying could eventually cause inflation or unsettle financial markets, they said.

If the Fed ended its program, it would likely lead to higher U.S. interest rates and a stronger dollar.

Foreign exchange analyst Kathy Lien of BK Asset Management said the minutes suggest Fed policymakers could end the bond purchases “way before” the unemployment rate falls below the Fed’s current target of 6.5 percent.

“While we are not surprised that Fed officials talked about phasing out asset purchases again…we were surprised by how willing they are to look beyond the 7.9 percent unemployment rate,” Lien wrote in a client note.

The dollar added to its gains against the euro in the afternoon, up about a cent in late trading. The euro fell to $1.3281 late Wednesday from $1.3389 on Tuesday. The dollar also rose to 93.81 Japanese yen from 93.44 yen.

The British pound deepened its decline. It fell below $1.52 Wednesday for the first time since July 2010 after a report showed that the Bank of England was more concerned about Britain’s economy. If the country takes on more economic stimulus measures that result in lower interest rates, the pound could fall further.

In late trading, the pound was worth $1.5240 compared with $1.5423 late Tuesday.

The dollar also gained against the Canadian dollar and Swiss franc.

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