NEW YORK U.S. monetary authorities did not intervene in the foreign exchange market in the fourth quarter of 2012, the Federal Reserve Bank of New York said on Thursday in its quarterly report to Congress.
During the three months to December 31, 2012, the dollar's trade-weighted value, as measured by the Federal Reserve Board's major currencies index, rose 1 percent, the New York Fed said.
Against the yen, the dollar gained 11.3 percent during the period but fell 2.5 percent against the euro. It remained relatively little changed against most other major currencies over the period, according to the report.
"The dollar experienced some modest intraquarter volatility, as evolving U.S. political developments were a predominant focus of financial markets," the New York Fed said. "Developments surrounding the year-end scheduled sequestered fiscal spending cuts of the Budget Control Act of 2011 and expiration of the Tax Relief Act of2010 - collectively referred to as the "fiscal cliff" - dictated market sentiment for much of November and December."
The dollar's gain against the yen was attributed to expectations of greater fiscal and monetary policy accommodation resulting from a change in Japan's political leadership.
The decline against the euro came as sentiment toward the euro area continued to improve following the European Central Bank's explicitly stated support last summer for the euro, the report said.
The U.S. dollar depreciated 0.9 percent against the Chinese renminbi during the fourth quarter, with the renminbi reaching its strongest level since the Chinese authorities de-pegged the exchange rate in June 2005.
Market participants pointed to China's improved economic data, a moderation of its trade balance, and reduced euro-area uncertainty as contributing to the currency's appreciation.
For the year, the renminbi rose 1.0 percent against the dollar, a more modest appreciation than the 5.0 percent observed in 2011.
As of December 31, the value of the U.S. Treasury's Exchange Stabilization Fund foreign currency-denominated assets, comprising euro and yen holdings, totaled $24.95 billion.
The Federal Reserve System Open Market Account holdings of foreign-currency-denominated assets, also composed of euro and yen, totaled $24.97 billion. (Reporting by Nick Olivari; Editing by James Dalgleish)