Dollar Gains On Yen as Fed Eases Concerns
NEW YORK -- The dollar rebounded from a three-day rally in the yen after the Federal Reserve offered reassuring words on the U.S. economy, which calmed the frayed nerves of yen-funded carry-trade investors.</br></br>The dollar had already started to reverse the three-day yen rally before the Federal Open Market Committee meeting ended, amid market expectations that the FOMC wouldn't make comments that could roil the markets.</br></br>The FOMC didn't disappoint. It left rates on hold at 5.25% for the eighth straight time and continued to say it expects the U.S. economy to see "moderate" growth over the next few months.</br></br>That further eased recent worries among carry-trade investors, who borrow yen at low interest rates to buy higher-yielding currencies such as the dollar, that U.S. subprime mortgage sector problems could spill into the broader U.S. or global economies.</br></br>"The fear was that the Fed may be a bit dovish" on U.S. growth and inflation worries, said Matthew Strauss, senior currency strategist at RBC Capital Markets. "If they were, that may have reignited recent fears amongst carry-trade investors."