* Euro rises above resistance at $1.35
* U.S. economy unexpectedly contracts in 4th quarter
* Yen slides to 2-1/2-year low vs dollar, more losses seen
By Daniel Bases
NEW YORK, Jan 30 The U.S. dollar slid to a
14-month low against the euro on Wednesday after the U.S.
Federal Reserve maintained its $85 billion-a-month bond-buying
program to spur economic growth.
The Fed repeated its pledge to buy securities until the
outlook for employment "improves substantially." It also held
interest rates near zero.
"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 government reported the economy contracted by a 0.1
percent annual rate in the fourth quarter, though the Fed said
the unexpected downturn was likely temporary.
The euro spiked to $1.3567, a gain of roughly 0.56
percent, and the highest level since November 2011, according to
Reuters data. The euro zone currency had already strengthened
against the U.S. GDP data.
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. A European Central Bank
policymaker, Ewald Nowotny, said the recovery was seeping into
the real economy.
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 government's closely watched monthly
report on the labor market.
Against the yen, the dollar rose 0.40 percent to trade at
91.09 yen. 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 Bank of Japan 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
The euro rose 0.94 percent against the yen to trade at
The greenback fell 1.11 percent to 0.9109 Swiss francs
, just off a four-week low hit early during New York
In other central bank monetary policy decisions, the Reserve
Bank of New Zealand left its benchmark Official Cash Rate
unchanged, as expected, at a record low 2.5 percent. The bank
said inflation remains tame due to an overvalued New Zealand
The greenback lost 0.42 percent against the kiwi to trade at