Forex - Dollar firms on fresh Fed taper talk, U.S. fiscal uncertainty

The dollar firmed against most major currencies on Friday after a Federal Reserve official said the U.S. central bank can't rule out an October start date to begin tapering stimulus measures.

Brewing fears of a fiscal impasse in the U.S. sent investors seeking safety in liquid greenback positions as well.

In U.S. trading on Friday, EUR/USD was down 0.09% at 1.3518.

The Federal Reserve could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program, St. Louis Fed President James Bullard said Friday.

On Wednesday, the Fed decided to leave the stimulus program unchanged, surprising many who were expecting a decision to trim the amount of assets purchased a month by USD10 billion or even more.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not due to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December, though don't rule out action next month if economic indicators improve before then.

“This was a close decision here in September, so it’s possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October,” Bullard told Bloomberg Television. 

“It’s possible, but I’m not saying it will happen. You have other meetings after that.”

Elsewhere in the U.S., the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival in the Senate, not to mention a presidential veto, the posturing sparked fears of brinkmanship and inaction that sent investors seeking safety in the dollar ahead of a fiscal showdown brewing in the U.S.

Failure to agree on debt-ceiling solution could result in a government shutdown in October, and the growing uncertainty sent investors snapping up safe-haven dollar positions.

Meanwhile in the euro zone, investors braced for the outcome of Germany's general election on Sunday, with Chancellor Angela Merkel looking to secure a third term.

The greenback was up against the pound, with GBP/USD down 0.09% at 1.6018.

Official data showed that U.K. public-sector net borrowing rose less than expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts were expecting public-sector net borrowing to rise by GBP12 billion last month.


The dollar was down against the yen, with USD/JPY down 0.08% at 99.38, and flat against the Swiss franc, with USD/CHF trading up 0.01% at 0.9107.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.35% at 1.0301, AUD/USD down 0.39% at 0.9403 and NZD/USD trading up 0.00% at 0.8376.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.11% at 80.57.

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Federal Reserve's Bullard: tapering possible in October

The Federal Reserve could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program, St. Louis Fed President James Bullard said Friday.

On Wednesday, the Fed decided to leave the stimulus program unchanged, surprising many who were expecting a decision to trim the amount of assets purchased a month by USD10 billion or even more.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not due to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December, though don't rule out action next month if economic indicators improve before then.

“This was a close decision here in September, so it’s possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October,” Bullard told Bloomberg Television. 

“It’s possible, but I’m not saying it will happen. You have other meetings after that.”

The dollar regained traction in part on Bullard's comments.

Stimulus tools such as monthly asset purchases drive down interest rates to spur recovery, weakening the dollar while boosting stock and commodity prices in the process.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.08% at 80.55 in afternoon trading on Friday. 

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Forex - GBP/USD falls as U.S. fiscal concerns spark dollar demand

The pound edged lower against the dollar on Friday after a fiscal impasse in the U.S. Congress heated up and sparked fears of a government shutdown, while hawkish comments from a Federal Reserve official also sparked demand for the greenback.

In U.S. trading on Friday, GBP/USD was trading at 1.6019, down 0.08%, up from a session low of 1.5987 and off from a high of 1.6066.

Cable was likely to find support at 1.5885, Tuesday's low, and resistance at 1.6163, Wednesday's high.

In the U.S. earlier, the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival in the Senate, not to mention a presidential veto, the posturing sparked fears of brinkmanship and inaction that sent investors seeking safety in the dollar ahead of a fiscal showdown brewing in the U.S.

Failure to agree on a solution could result in a government shutdown in October, and the growing uncertainty sent investors snapping up safe-haven dollar positions.

Elsewhere, St. Louis Federal Reserve President James Bullard said earlier that the U.S. central bank could decide to taper its stimulus program at its October meeting, which supported the greenback somewhat.

Federal Reserve stimulus programs such as its USD85 billion bond-buying program aim to spur recovery by driving down long-term interest rates, which weakens the greenback.

The Federal Reserve will hold a monetary policy meeting Oct. 29-30 but is not due to hold a press conference then, which left many expecting a decision to taper asset purchases to come in December prior to Bullard's comments.

Meanwhile in the U.K., official data showed that public-sector net borrowing rose less than expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts were expecting public-sector net borrowing to rise by GBP12 billion last month.

The pound, meanwhile, was down slightly against the euro and down against the yen, with EUR/GBP up 0.05% at 0.8444 and GBP/JPY down 0.18% at 159.15.

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U.S. futures steady as debt worries re-emerge; Dow Jones up 0.01%

U.S. stock futures pointed to a steady open on Friday, as markets were jittery amid fresh concerns over the U.S. debt ceiling, although recent news the Federal Reserve chose to maintain its stimulus program lent some support to market sentiment. 

Ahead of the open, the Dow Jones Industrial Average futures pointed to a 0.01% gain, S&P 500 futures signaled a 0.02% dip, while the Nasdaq 100 futures indicated a 0.10% rise. 

U.S. stocks rallied after the Fed on Wednesday held back from reducing the USD85 billion pace of its monthly asset purchases. 

Fed Chairman Ben Bernanke refused to commit to reducing bond purchases this year, saying the stimulus program was "not on a preset course." 

But investors remained cautious as U.S. Republicans and Democrats must quickly decide on how to continue funding the government and whether to increase the government's borrowing authority by raising the debt ceiling. 

If President Barack Obama's administration and Republicans do not come to an agreement to raise the nation's borrowing cap before October, the U.S. Treasury may be able to avoid exceeding the USD16.7 trillion debt limit, which could send the country into default. 

Apple shares were expected to be active, as the company's new iPhone 5 went on sale across the globe on Friday. 

Also in the tech sector, Microsoft, down 0.03% in extended trading, after Chief Executive Officer Steve Ballmer, who will be retiring within a year, said the company is still working to make sure that the personal computer remains relevant as "the device of choice." 

Priceline.com was also likely to be in focus, after closing above USD1,000 a share yesterday, making the U.S. online travel site the ninth member of a club of U.S. companies trading in quadruple digits. 

Other stocks likely to remain in focus included Darden Restaurants, scheduled to report quarterly earnings later in the day. 

Across the Atlantic, European stock markets were mixed. The EURO STOXX 50 added 0.15%, France’s CAC 40 inched up 0.05%, Germany's DAX added 0.09%, while Britain's FTSE 100 dipped 0.04%. 

During the Asian trading session, Japan’s Nikkei 225 Index fell 0.16%, while Hong Kong's Hang Seng Index remained closed for a national holiday. 

Trading volumes were expected to remain light on Friday, as no U.S. economic data was to be released throughout the session.

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Dollar mostly lower vs. rivals in subdued trade

The U.S. dollar was mostly lower against the other major currencies in subdued trade on Friday, as news the Federal Reserve is holding its stimulus program still weighed on the greenback, although fresh U.S. debt concerns limited risk appetite. 

During late European morning trade, the dollar was lower against the euro, with EUR/USD adding 0.09% to 1.3542. 

The greenback remained under pressure after the Fed on Wednesday held back from reducing the USD85 billion pace of its monthly asset purchases. 

Fed Chairman Ben Bernanke refused to commit to reducing bond purchases this year, saying the stimulus program was "not on a preset course." 

But markets were jittery as U.S. Republicans and Democrats must quickly decide on how to continue funding the government and whether to increase the government's borrowing authority by raising the debt ceiling. 

If President Barack Obama's administration and Republicans do not come to an agreement to raise the nation's borrowing cap before October, the U.S. Treasury may be able to avoid exceeding the USD16.7 trillion debt limit, which could send the country into default. 

Separately, investors were eyeing the outcome of Germany's general election on Sunday., with Chancellor Angela Merkel looking to secure a third term. 

The greenback was steady against the pound, with GBP/USD easing up 0.05% to 1.6040. 

Official data showed that U.K. public sector net borrowing rose less-than-expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts had expected public sector net borrowing to rise by GBP12 billion last month. 

Elsewhere, the greenback slipped lower against the yen and the Swiss franc, with USD/JPY edging down 0.12% to trade at 99.33, and withUSD/CHF falling 0.14% to 0.9093. 

Earlier in the day, Bank of Japan Governor Haruhiko Kuroda reiterated his call for government efforts to bring its finances under control, saying that sustainable finances are a "indispensable" to achieve sustainable growth. 

Speaking at a meeting in Tokyo, Kuroda offered few clues over whether he is planning to implement additional easing measures to mitigate the impact that an expected sales tax hike could have on Japan's economic recovery. 

The greenback was mixed to higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rising 0.28% to 1.0294,AUD/USD shedding 0.16% to 0.9425 and NZD/USD adding 0.12% to 0.8385. 

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.07% to 80.42. 

Trading volumes were expected to remain light on Friday, as no U.S. economic data was to be released throughout the session.

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Forex - GBP/USD edges higher after positive U.K. data

The pound edged higher against the U.S. dollar in thin trade on Friday, supported by the release of positive U.K. public sector borrowing data, although investors remained cautious amid renewed concerns over U.S. debt troubles. 

GBP/USD hit 1.6066 during European morning trade, the session high; the pair subsequently consolidated at 1.6053, adding 0.13%. 

Cable was likely to find support at 1.5893, the low of September 18 and resistance at 1.6146, Thursday's high. 

Official data showed that U.K. public sector net borrowing rose less-than-expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts had expected public sector net borrowing to rise by GBP12 billion last month. 

But markets were jittery as U.S. Republicans and Democrats must quickly decide on how to continue funding the government and whether to increase the government's borrowing authority by raising the debt ceiling. 

If President Barack Obama's administration and Republicans do not come to an agreement to raise the nation's borrowing cap before October, the U.S. Treasury may be able to avoid exceeding the USD16.7 trillion debt limit, which could send the country into default. 

Sterling was also higher against the euro with EUR/GBP slipping 0.15%, to hit 0.8428. 

Sentiment on the single currency was fragile ahead of the outcome of Germany's general election on Sunday, with Chancellor Angela Merkel looking to secure a third term. 

Trading volumes were expected to remain light on Friday, as no U.S. economic data was to be released throughout the session.

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