The Fed and BOJ left official benchmark rates unchanged on Wednesday but the U.S. dollar declined broadly as soon as the Federal Reserve said it will buy up to $300 billion of long-dated Treasuries over the next six months to help boost the economy, in addition with $750 billion more of mortgage debt to ease credit conditions. Investors feared the central bank's move would flood the market with dollars and increase already large U.S. deficits. The signal currency rallied and posted its biggest one-day gain versus the dollar since its 1999 inception, jumped above 1.3400 level and last trading up 3.7 percent at 1.3476 in late New York session.
The dollar fell to as low as 95.66 versus Japanese yen before stabilizing, last traded down by 2.5 percent at around 96.20. It also shed 3.5 percent to 1.1403 against the Swiss francs, its biggest daily decline since mid-December. Cable rose above 1.4300 level, rebounding from losses seen after data showed that the number of Britons filing for jobless benefits last month rose by a record amount.
The benchmark Treasury yields posted a biggest one-day drop since 1987 and U.S. stock markets rallied as risk appetite returned. The Dow Jones industrial average gained more than 90 points or 1.23 percent and end at 7,486. The Standard & Poor’s 500 index surged 2.09 percent to 794 while Nasdaq Composite index added nearly 2 percent to 1,491.
Commodity currencies such as the Canadian and Australian dollars also rose sharply against the greenback. In late New York trading, the Canadian dollar jumped by 1.7 percent while Australian dollar posted a 2.3 percent gain versus the dollar. The New Zealand dollar also traded higher by 2.7 percent at 0.5447 against the dollar in late U.S. session.
On Thursday, economic data release includes Japan all industrial index and Bank of Japan report, Switzerland’s trade balance and ZEW survey, U.K. PSNCR and CBI industrial trend, eurozone industrial orders, Canada CPI data, and U.S. Jobless claims, leading indicators and Philadelphia Fed survey.