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Dollar Remains Lower as Fed Says Economy Still Warrant Stimulus

March 20 (Bloomberg) -- The dollar remained lower against the euro after the Federal Reserve signaled gains in employment aren’t yet sufficient for policy makers to move closer to reducing stimulus measures.

The Fed said the nation’s unemployment rate will hit the central bank’s threshold for raising interest rates sometime in 2015. The Fed under Chairman Ben S. Bernanke will continue buying $85 billion of bond per month, known as quantitative easing, or QE, as it seeks to reduce the unemployment rate that hasn’t fallen below 7 percent since November 2008. The euro strengthened from a four-month low against the dollar as Cyprus sought alternatives to the European Union plan to help the nation avoid a banking collapse.

“I don’t see anything in the statement that would talk about any difference for QE,” said Dan Dorrow, the head of research at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. “We’ll get the nuances for that in the press conference.”

The dollar fell 0.6 percent to $1.2958 as of 2:04 p.m. in New York. It strengthened 0.4 percent to 95.52 yen.

The dollar reached $1.3587 per euro on Jan. 30, the weakest since November 2011, after the previous central bank meeting when policy makers said would continue bond purchases and retained the federal-funds-rate target of zero to 0.25 percent, where it has held since December 2008.

Bernanke Briefs

Bernanke, starting today, will cut the time between the release of post-meeting statements by the Federal Open Market Committee and his news briefings, giving investors less opportunity to misperceive the Fed’s intent.

In recent presentations, he has pledged to sustain easing, defending monthly bond purchases during congressional testimony last month and warning that “premature removal of accommodation” may weaken the expansion. The Fed is targeting a reduction of the jobless rate to 6.5 percent while keeping inflation to 2.5 percent.

The U.S. economy is forecast to expand 1.9 percent this year, according to the median estimate of 93 economist surveyed by Bloomberg. That’s up from 1.8 percent according to the February survey.

Cyprus hasn’t reached any deal with Russian investors for the sale of Cyprus Popular Bank Plc, government spokesman Christos Stylianides said in a telephone interview in Nicosia today. A preliminary deal to sell the bank to Russian investors was reached, Kathimerini Cyprus reported earlier, without citing anyone.

EU Stance

The European Union stands ready to facilitate solutions on Cyprus, the group said today in a statement. Luxembourg Finance Minister Luc Frieden yesterday called for the 17 euro-area finance ministers to reconvene “as soon as possible” to put together a new package for the island nation.

“The ECB statement that they are going to provide more liquidity means there is some time for renegotiation for Cyprus, so that’s a positive,” said Lutz Karpowitz, a senior foreign-exchange strategist at Commerzbank AG in Frankfurt. “As long as there is still some room for further negotiations, the market is relatively relaxed. If there is more and more impression that there won’t be a solution, then there may be more weakness in the euro.”

The euro may weaken to $1.25, the lowest since August, if no solution for Cyprus is found, Karpowitz said.

Europe will find a resolution for Cyprus, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager.

Market Size

“It’s not a really major economic issue,” Fink said in a Bloomberg Television interview in Hong Kong. “It’s a $10 billion issue. It does remind us of the frailty of Europe. It does remind us that the European fix will be multiple years.”

China’s yuan rose to a 19-year high against the dollar after the central bank set the currency’s reference rate at the strongest level since Jan. 15 amid U.S. Treasury Secretary Jacob L. Lew’s visit to Beijing for talks.

The yuan appreciated to 6.2113, the strongest level since the government unified the official and market rates at the end of 1993. China limits the currency’s movement to 1 percent on either side of the daily fixing.

To contact the reporter on this story: John Detrixhe in New York at

To contact the editor responsible for this story: Dave Liedtka at

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