Dollar gains as central banks stay put

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The U.S. dollar rose against major currencies in late New York trading this week, while central banks’ decisions to keep monetary policy unchanged disappointed investors who had expected them to do more.

The Federal Reserve on Wednesday said it would maintain the interest rate exceptionally low through at least late 2014, but did not take further monetary easing policies.

The central bank also acknowledged that the U.S. economy is losing momentum and pledged to take further steps to stimulate the economy if the weakness in job market continued.

Following the Fed’s statement, the European Central Bank (ECB) on Thursday decided to leave the key interest rate unchanged at 0.75 percent after its monetary policy meeting on Thursday.

ECB President Mario Draghi said the central bank would help to support the struggling European countries’ bonds market, only if the governments asked for help from the European Financial Stability Facility.

The central bank chief’s comments failed investors, who had hoped the ECB would take immediate actions to help bring down borrowing cost of European countries, after the central bank pledged to “do whatever it takes to save the euro” last week. The euro slipped after the ECB decision.

Meanwhile, the Bank of England also decided to keep the key interest rate unchanged at 0.5 percent and maintain the bond purchase program.

The central banks’ decisions to stay hold of the monetary policies sank the euro while boosted the dollar this week. The dollar index gained 0.16 percent to 82.315 this week.

Also supporting the dollar this week, the U.S. economic data showed recovery sign. The Conference Board reported that the U.S. consumer confidence improved in July, after declining for four consecutive months.

The S&P/Case Shiller 20-city home price index, the leading measure of U.S. home prices, rose 0.9 percent in May on a seasonally adjusted basis, topping expectations of a 0.5-percent increase.

Meanwhile, the U.S. manufacturing activities showed little improvement in July. The Institute for Supply Management’s index slightly rose to 49.8 in July from 49.7 in June.

The most anticipated non-farm payroll report released by the U.S. Labor Department on Friday also showed improvement. It said that the economy added 160,000 jobs in July, beating previous estimates of 100,000.

The upbeat economic data helped to ease investors’ concerns about the U.S. economy and stimulate the confidence on the greenback.

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