The dollar fell against the yen and the euro in Asia Thursday, as investors sold the U.S. unit following the Federal Reserve's announcement overnight of a second round of quantitative easing.
The Fed's policy-setting Open Market Committee decided Wednesday to buy $600 billion of U.S. Treasurys over the next eight months. While the result was roughly in line with market expectations, limiting the market impact, the move is expected to continue weighing on Treasury yields, keeping downward pressure on the dollar, dealers said.
"As long as U.S. Treasury yields are pressured down, the downward trend for the dollar-yen won't change," said Motonari Ogawa, a senior FX dealer at Barclays Bank.
The benchmark 10-year treasury yield was down 1.5 basis point at 2.577% after the FOMC outcome.
At 0450 GMT, the U.S. currency was down at Y80.84 compared with Y81.13 late Wednesday in New York. It could fall to around Y80.70 later in the global day, Ogawa said.
Dealers said that in the coming weeks, expectations for further falls in U.S. Treasury yields could gradually push the dollar down again toward its record low of Y79.75.
"It's a matter of time" before the dollar falls below the psychologically key Y80.00 mark, said Kenichi Nishii, senior dealer at Bank of Tokyo-Mitsubishi UFJ. But such a fall looks unlikely for now as investors will probably refrain from major bets before the outcome of the Bank of Japan's two-day policy board meeting Friday, Nishii said.
The Fed's move will likely drag on the dollar against other currencies ahead, analysts said.
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