* Fed ties policy to specific economic target
* Fed extends debt-buying in line with expectations
* Speaker of the U.S. House Boehner again rejects Obama's
* Yen down across the board on prospects of more easing
By Julie Haviv
NEW YORK, Dec 13 The dollar held steady against
the euro after falling for three straight days on Thursday as a
looming U.S. fiscal crisis curbed weakness in the currency after
the Federal Reserve announced further monetary stimulus.
The Fed, after its policy meeting ended on Wednesday,
matched market expectations by saying it would keep buying $45
billion of government bonds each month after its "Operation
Twist" program expires. That is in addition to its purchases of
$40 billion a month in agency mortgage-backed securities.
It said interest rates would remain near zero until
unemployment falls to at least 6.5 percent. The Fed also
explicitly linked its policy path to unemployment and
Without higher rates or the Fed scaling back the amount of
available dollars in the economy, the dollar's upside is
limited. It could gain, however, if the White House and Congress
cannot reach a deficit reduction deal by the end of the year.
Failure to reach an agreement will automatically trigger
massive spending cuts and tax increases in 2013. This so-called
"fiscal cliff" should buoy the dollar due to its safe-haven
Congressional Republicans dug in on their opposition to
raising taxes on the wealthy, even as polls showed them at a
growing disadvantage in the U.S. "fiscal cliff" showdown with
President Barack Obama.
"We view the Fed decision as notably bearish the dollar,
particularly against currencies whose central banks are not
engaging in offsetting type monetary policies; however the
uncertainty surrounding the looming fiscal cliff dampens the
impact near-term but not the medium-term," said Camilla Sutton,
chief currency strategist at Scotiabank in Toronto.
The euro was last flat at $1.3074, having hit a
session low of $1.3039 and a session high of $1.3100.
With the Fed actively targeting economic data, the dollar
could see a boost if data shows any sign of improvement,
analysts said. But they also cautioned that the euro could
remain supported in the near term with positive developments in
the euro zone and successful bond auctions in Italy.
The European Union reached a landmark deal on Thursday to
make the European Central Bank the bloc's top banking
supervisor, a move that was seen as a step closer to resolving
the debt crisis.
Against the yen, the dollar was at 83.56 yen, up 0.4
percent on the day, having hit a near nine-month high of 83.67.
The dollar was expected to rise further against the Japanese
currency on expectations the Bank of Japan will ease monetary
The BOJ meeting will take place after Sunday's election
which looks set to see the opposition Liberal Democratic Party
clinch a resounding victory. LDP leader Shinzo Abe has been
pushing the BOJ for more powerful monetary stimulus.
Part of the reason for the rise in dollar/yen was higher
U.S. Treasury bond yields, which makes the dollar relatively
more attractive against its low-yielding Japanese peer.
Earlier on Thursday the Swiss franc rose against
the euro after the Swiss National Bank left its cap at 1.20
francs per euro but reiterated it was prepared to buy foreign
currency in unlimited amounts to maintain it.
The euro was last down 0.2 percent at 1.2083 francs.