The dollar is posting modest gains against its major competitors at the end of the trading week. The U.S. currency is extending its recovery efforts following the surprise Federal Reserve decision Wednesday afternoon to not begin tapering its stimulus measures. The dollar also appears to have benefitted from uncertainty ahead of the German elections, which will take place on Sunday.
The Federal Reserve could begin to taper its massive bond-buying program in October if the economy continues to improve, according to St. Louis Fed President James Bullard. Bullard hinted that Fed officials were divided on whether to scale back the $85 billion per month asset purchase plan.
“This was a close decision here in September, so it’s possible you get some data that change the complexion of outlook and make the committee be comfortable with a small taper in October,” Bullard said.
The European Central Bank said EUR 7.91 billion will be repaid next week by the banks that participated in the long-term refinancing operations. Banks started early repayment of the first LTRO loans in January with the initial amount of EUR 137.2 billion.
The dollar has climbed to around $1.3525 against the Euro on Friday, from Thursday’s 7-month low of $1.3568.
The greenback has risen to around $1.6000 against the pound sterling at the end of the week, from Wednesday’s 8-month low of $1.6162.
The U.K. budget deficit narrowed slightly more than expected in August, suggesting that economic recovery started to bring positive developments in public finances. Data published by the Office for National Statistics on Friday showed that public sector net borrowing, excluding temporary effects of financial interventions, came in at GBP 13.2 billion, which was below the GBP 14.4 billion borrowing seen during the same period of last year. The deficit was expected to decline to GBP 13.3 billion.
Bank of Japan Governor Haruhiko Kuroda said the global economy will pick up gradually as the U.S. and the European economies improve. The recovery will in turn raise exports and production in Japan and boost fixed investment.
Further, Kuroda said he is confident about the aggressive monetary policy action taken in April.
Japan’s economy has been moving smoothly along the path to achieving the 2 percent “price stability target,” he said in a seminar in Tokyo. Again the 2 percent inflation should be maintained in a stable manner.
The buck has also climbed above a range around the Y99.400 level against the Japanese Yen on Friday, to a 1-week high of Y99.658.