* Euro rises above resistance at $1.35, highest since Nov.
* U.S. economy unexpectedly contracts in 4th quarter
* Fed maintains near zero interest rates, continues asset
* Yen slides to 2-1/2-year low vs U.S. dollar, more losses
By Daniel Bases
NEW YORK, Jan 30 The U.S. dollar slid to a fresh
14-month low against the euro on Wednesday after the U.S.
Federal Reserve kept interest rates near zero and maintained its
bond-buying program to spur economic growth.
The Fed's decision to maintain its $85 billion a month
bond-buying program is geared toward boosting the economy and is
not likely to stop until the outlook for unemployment improves
Loose monetary policy gives investors less incentive to buy
and hold U.S. dollars, thereby contributing to its weakness.
"This was broadly in line with expectations," said Michael
Woolfolk, senior currency strategist at BNY Mellon in New York.
"So the mood of the market has not changed much at all. And
certainly after the U.S. data this morning, particularly the GDP
report, we can expect the Fed to continue with their very
accommodative monetary policy, and that's negative for the
dollar," he said.
The euro spiked to a fresh high of $1.3587, a gain of
roughly 0.70 percent, according to Reuters data. The euro zone
currency was already stronger against the greenback after the
U.S. Commerce Department earlier reported an unexpected 0.1
percent contraction in U.S. fourth quarter economic activity,
The weakness in the U.S. economy, while likely short-lived,
say economists, contrasted against an improving economic outlook
in the euro zone. It was the first time the U.S. economy shrank
since the 2007-09 recession.
The euro broke above key resistance at $1.35 and traders
said the rally has further to go after recent positive news on
the German economy and Europe's banks.
Further upside targets for the euro are at $1.3640, the high
in mid-November, 2011, and $1.3833-35, the 61.8 percent
retracement of the move down from May 2011 to July 2012, which
also coincides with the July 2011 low.
Euro zone data showed the region's economic sentiment rose
for the third month in a row, while European Central Bank
policymaker Ewald Nowotny said the recovery was seeping into the
The dollar traded at 91.19 yen, a rise of 0.51 percent on
the day. It earlier touched a 2-1/2-year high at 91.40
yen according to Reuters data. Traders reported an option
barrier at 91.50 yen, which could cap gains in the near term.
Selling the yen has been mostly a one-way bet since
mid-November, based on expectations that Japanese Prime Minister
Shinzo Abe would push the BOJ into more aggressive monetary
easing to beat deflation.
"We have a forecast of 95 yen for this quarter but even that
could be exceeded given the pace of the current moves," said Ian
Stannard, head of European FX strategy at Morgan Stanley.
A separate report Wednesday showed U.S. private employers
added 192,000 jobs in January, more than economists were
expecting, in a sign of growth in the labor market. The data
comes two days ahead of the all-important government nonfarm