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NEW YORK: The dollar fell on Thursday in tandem with Treasury yields, driving back to the weaker end of a well-worn range below $1.40 per euro, on talk Federal Reserve quantitative easing could be larger than expected. A New York Federal Reserve survey of dealers and investors on the size of the stimulus program included scenarios of up to $1 trillion, a figure larger than recent estimates

The bigger the move by the US central Bank to effectively print money, the more it will push down US Treasury yields and reduce the attractiveness of dollar-based assets.
Dollar selling against the euro and other currencies by reserve managers also sent the US currency lower.
“The issue is whether the market believes the Fed will deliver significant quantitative easing over a definitive time line,” said Peter Frank, a currency strategist at Societe Generale in London. “If they do, the dollar will weaken.”
In early New York trade, the euro had risen 0.9 per cent on the day to $1.3898. This helped to push the dollar 1 per cent lower versus a currency basket on the day though it is down only a marginal 0.6 per cent for the year to date.
Analysts said the dollar was also weighed down by a narrowing spread between 10-year US and euro-zone government bonds.
Euro gains kept it above a one-week low around $1.3734 hit on electronic trading platform EBS on Wednesday, even as debt concerns in Ireland and Greece and a breakdown in budget talks in Portugal highlighted problems facing periphery euro-zone countries.
Frank said support for the euro despite sovereign debt issues illustrated the resilience of the single currency, and that he expected it to rise back above $1.40 in the near term.
But worries about the banking sector and the region’s debt problems could check the euro’s gains. The European Central Bank’s quarterly Bank Lending Survey said more banks expect to tighten their credit standards for corporate loans in Q4.
Against the yen, the dollar fell 0.9 per cent to 80.93 yen. Small stop loss were cited by traders in the 80.90 area with bids at 80.60 and 80.40. There are also solid 80.00 barriers.
The Japanese currency showed little reaction to a Bank of Japan decision to keep interest rates virtually at zero while holding off from new policy initiatives. -Reuters


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