Dollar Remains Lower Versus Euro as Fed Concludes Policy Meeting

By Kristine Aquino and Monami Yui

Dec. 12 (Bloomberg) -- The dollar remained lower versus the euro after a two-day decline, with the Federal Reserve expected to announce today an expansion of asset purchases that tend to weaken the U.S. currency.

The greenback slid yesterday versus most of its 16 major counterparts amid expectations the Fed will add Treasury purchases to an existing program that buys $40 billion in mortgage bonds each month. The euro was supported ahead of a meetings of European Union finance ministers and head of
government this week, while Greece met its bond buyback target.
The yen weakened against all its peers after Japan's government said North Korea launched a rocket.

"The bias is for the dollar to be sold," said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan's third-largest bank by market value. "The Fed seems to have no intention to relax its easing stance."

The dollar was little changed at $1.3006 per euro as of 10:10 a.m. in Tokyo after falling 0.6 percent in the previous two days. It gained as much as 0.1 percent to 82.63 yen before trading at 82.55 from
82.52 in New York. Europe's shared currency was at 107.36 yen after rising 0.7 percent yesterday, the biggest one-day gain since Nov. 21.

The Federal Open Market Committee will announce $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to the median estimate in a Bloomberg News survey of 49 economists. It concludes a two-day policy meeting today.

Keep Buying

The purchases will follow the expiration at year-end of the so-called Operation Twist program. The U.S. central bank pumped $2.3 trillion into the financial system from 2008 to 2011 in two rounds of the stimulus strategy called quantitative easing, or QE.

The dollar lost 1.4 percent in the past month, the second- biggest drop among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen had the largest decline, falling 5.5 percent. The euro gained 1.2 percent.

EU leaders gathering tomorrow in Brussels will debate a road map for the overhaul of the euro region, including increased powers to intervene in national budgets and the establishment of a single banking supervisor.

An official from Greece's Finance Ministry said yesterday investors tendered Greek bonds with a face value of more than 31 billion euros ($40.3 billion), meeting a goal that's crucial to unlocking aid from the EU and the International Monetary Fund.

Euro-area finance ministers discussed the transaction on a conference call yesterday, concluding that no insurmountable obstacles remain to the next disbursement of aid to the nation, according to a European official who spoke on the condition of anonymity.

Rocket Launch

North Korea launched a rocket at around 9:49 a.m. Japan time, and it headed in a southerly direction, passing over Okinawa, before falling into the sea east of the Philippines, the Japanese government said.

The Australian dollar climbed to the highest in more than two months as Asian stocks advanced, boosting demand for higher- yielding assets. The so-called Aussie bought $1.0533 after earlier touching $1.0541, the strongest since Sept. 17. The MSCI Asia Pacific Index of shares added 0.3 percent.