The Dollar falls sharply against the Euro as the FED starts to print

The dollar headed for a record weekly drop against the euro after the Federal Reserve ramped up supply of the currency by unexpectedly saying it will start buying Treasuries. The greenback low versus the European currency and versus the yen as the Fed said March 18 its balance sheet will grow by as much as $1.15 trillion as it buys up to $300 billion of government debt and purchases more mortgage bonds. “As the money-printing machine kicks into high gear, dollar devaluation should accelerate with a ballooning money supply,” Yilin Nie, New York-based currency strategist at Morgan Stanley, wrote in a research note yesterday. The Fed’s move “is a key negative for the dollar.” The EUR/USD is currently trading at $1.3693 as of 8:25am, GMT.

Sterling rose against the dollar on Thursday, reversing early losses, as the U.S. currency weakened broadly after the U.S. Federal Reserve's surprise move to buy long-term Treasuries. The pound was little affected by weak UK economic data released on Thursday, overshadowed by the dollar's bearish trend. "The Fed's move has dominated over the UK data because you can see that cable is still going up," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Service. The dollar index fell 1.4 percent to 82.972 last seen in mid January. The GBP/USD is currently trading at $1.4558 as of 8:40am, GMT.

The Australian and New Zealand dollars rose, heading for a third weekly gain, as commodities surged and the U.S. currency slid on concern the Federal Reserve’s plans to keep yields low will weaken the greenback. “The key factors are some expectations in the market that we are close to the bottom of the global recession and we’ve seen the bottom in commodity prices,” said Thomas Harr, a Singapore-based currency strategist at Standard Chartered Plc. “The hopes are that China’s economy is also close to the bottom and its fiscal stimulus could have an impact, and that would obviously benefit Australia because China is a very important trading partner for Australia in commodities.” The AUD/USD is trading at 0.6910 as of 9:05am, GMT.

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