Last updated: June 18, 2013 10:26 pm

Dollar gains on yen as Fed meets

The dollar rose against the yen amid expectations that the US Federal Reserve could announce plans to slow its purchases of bonds to stimulate the US economy in the near future.

The US currency rose 0.8 per cent to Y95.24 as the Fed’s open market committee embarked on a two-day meeting to discuss monetary policy, with traders anticipating some signal on how much longer the central bank would continue buying $85bn of bonds each month.

The pound fell 0.5 per cent against the dollar to $1.5647 after UK inflation was higher than expected in May, hitting 2.7 per cent on an annual basis from 2.4 per cent in April. Sterling fell 0.7 per cent against the euro to €1.1677.

The dollar also climbed against major emerging market currencies, which have suffered sharp losses in recent weeks amid expectations of less liquidity from the Fed.

The US currency rose 0.3 per cent against the South African rand to R9.9521 and was 1.3 per cent stronger against the Indian rupee at Rs58.87.

The dollar was also stronger against the rouble after Russian officials said they could seek to weaken the currency to try to stimulate the economy.

“Emerging market currencies are exhibiting considerable nerves ahead of the big FOMC day and are likely to continue to trade that way into the Bernanke Q&A [today],” said Alan Ruskin, currency strategist at Deutsche Bank. Yet the dollar index, which weighs the US currency against a basket of major counterparts, was flat after the euro climbed above $1.34 for the first time since February.

The single currency was given a boost earlier in the day after Mario Draghi, European Central Bank president, said in a speech that the central bank was still considering non-conventional measures to stimulate the eurozone economy, repeating some of his comments made at the ECB press conference earlier in the month.

The euro rose 0.3 per cent to touch $1.3415, a four-month high. The single currency also gained more than 1 per cent against the yen to Y127.62.

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