*Fed unveils Operation Twist, dollar impact mild to positive
*Greece outlines key measures for more aid
*Swiss franc slumps amid SNB target talk
(Updates prices, adds quotes and graphics)
By Julie Haviv
NEW YORK, Sept 21 The dollar rose against the
euro and yen on Wednesday, buoyed by the appeal of higher
short-term rates, after the U.S. Federal Reserve, as widely
expected, said it would shift its portfolio in favor of
The Fed unveiled a program, dubbed "Operation Twist" by
market participants, to put more downward pressure on
long-term interest rates over time and help the battered
housing sector. For details, see [ID:nS1E78J25W]
The Fed said it would launch a new $400 billion program
that will tilt its $2.85 trillion balance sheet more heavily
toward longer-term securities by selling shorter-term notes
and using those funds to buy longer-dated Treasuries.
An important dollar-positive by-product of the Fed's
program is higher short-term rates. Also supporting the dollar
is that the Fed chose to not increase the money supply.
"But it seems this is one of the last things they (the
Fed) can do, so I think we might see some dollar profit-taking
at some point," said Brian Dolan, chief strategist at
Forex.com in Bedminster, New Jersey. "Europe's still a mess
and the global economy right now seems to be stagnating. And
this seems to be the Fed's final shot."
In late afternoon New York trade, the euro dropped 0.6
percent to $1.3618 EUR=. The dollar also hit session highs
against the Australian dollar and sterling after the Fed's
"Medium and short run, this policy will have little impact
on the economy and even less impact on the dollar," said
Joseph Trevisani, chief market analyst at FX Solutions in
Saddle River, New Jersey. "This is what was expected."
For more stories on Fed policy, see [FED/AHEAD]
Graphic-Fed balance sheet: link.reuters.com/cub62s
Graphic-Fed hawks, doves: link.reuters.com/ryv97p
FACTBOX-Doing the Twist and other tools: [ID:nS1E78F0SO]
The euro erased gains garnered in the afternoon on news of
Greece's outline of key measures to help alleviate the
country's fiscal problems.
Greece adopted yet more austerity measures to secure a
bailout installment crucial to avoid running out of money next
month, as the International Monetary Fund warned that Europe's
sovereign debt crisis risks tearing a giant hole in banks'
The euro and the dollar both rose against the Swiss franc
as talk swirled that the Swiss National Bank may lift its
euro/Swiss target to 1.25 from 1.20. The SNB declined
The dollar rose 1.2 percent to 0.8976 francs CHF= and
the euro climbed 0.6 percent to 1.2224 francs EURCHF=.
A strong currency hurts exports in Japan and Switzerland
and slows overall economic growth.
The dollar rose 0.3 percent to to 76.64 yen JPY=EBS, but
not far from a record low of 75.94 reached last month.
Sterling was down 1.4 percent at 1.5524 dollars GBP= and
was already under pressure before the Fed statement after
minutes released by the Bank of England showed it was ready to
pump more money into the UK economy. [ID:nAHLKKE73L]
(Additional reporting by Nick Olivari, Steven C. Johnson in
New York and Anirban Nag in London; Editing by Jan Psachal)