Dollar Demonstrates Strength with Help of QE Tapering

The US dollar jumped today as traders digest the news about quantitative easing tapering by the Federal Reserve. Excessive monetary stimulus was detrimental for the dollar and its reduction helped the currency to gain.

The Fed announced yesterday that it is going to reduce the size of its monthly asset purchases by $10 billion to $65 billion per month. Such move was not completely unexpected, but some market participants had though that the US central bank would not act so soon after the previous tapering, which has happened in December.

The dollar did not demonstrate strong reaction yesterday. As it often happens, the market needs time to react as news travel across the world. Today, the US currency broke out to the upside even though fundamental reports from the United States were worse than analysts have hoped for.

EUR/USD sank from 1.3659 to 1.3555 as of 23:36 GMT today. GBP/USD dropped from 1.6564 to 1.6496, reaching the low of 1.6444 intraday, while USD/JPY advanced from 102.27 to 102.78.

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