|Page (1) of 1 - 08/30/11||email article||print page|
Dollar pares gains after Fed minutes show central bankers discussing more support for economy
NEW YORK (AP) ' The dollar pared some of its gains against other currencies Tuesday after minutes from the Federal Reserve's August meeting showed the central bankers weighing offering more support for the economy.
Also, U.S. growth has slowed sharply and the Conference Board said Tuesday that its index of consumer confidence fell to its lowest level since April 2009. That's a larger drop than Wall Street analysts had expected.
Consumer spending makes up 70 percent of the U.S. economy including such big-ticket items as health care. If shoppers curb their spending, the economy could slow even further, or shrink.
Some of the Fed's policymakers said in the Aug. 9 meeting that the weakening economy necessitated starting a new round of Treasury bond purchases. When the Fed buys up bonds, that can drive interest rates lower. Lower rates can support economic growth but tend to weigh on a currency because they make the currency less appealing as an investment for those seeking big returns.
Fed Chairman Ben Bernanke said at an annual economics conference over the weekend that the central bank would extend its September meeting to two days so policymakers could have a fuller discussion of options to help the economy.
Analysts call the strategy of buying up bonds to lower interest rates quantitative easing, or "QE."
"The pessimistic tone of the minutes made it clear that policymakers are warming to the idea of more QE," said currency analyst Kathy Lien of brokerage GFT.
The benchmark rate is already at a record low set by the Fed.
The central bank at its August meeting pledged to keep rates super low for two more years.
In late trading Tuesday, the euro was worth $1.4447 from $1.4505 late Monday. But it recovered from a bottom of $1.4383 earlier in the day. A report on consumer and business sentiment from the 17 countries that use the euro fell more than expected in August, increasing fears that the region's economy may slow in the coming months.
In other trading, the British pound fell to $1.6312 from $1.6405. It was also higher from its level earlier in the day, when it traded below $1.63.
The dollar was nearly unchanged at 97.82 Canadian cents from 97.84 Canadian cents. It had traded above 98 cents earlier in the day.
The U.S. currency fell to 76.72 Japanese yen from 76.95 Japanese yen, but rose to 0.8193 Swiss franc from 0.8153 Swiss franc.