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Dollar surges on Fed bond tapering plans

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(Globalpost/GlobalPost)

The dollar surged against other major currencies Wednesday after the Federal Reserve signaled it was close to tapering its bond-buying program.

Near 2100 GMT, the euro traded at $1.3297, down from $1.3396 late Tuesday.

The dollar bought 96.39 yen, up from 95.37.

The dollar also gained on the British pound and the Swiss franc.

The euro traded at 128.24 yen compared with 127.76 the prior day.

Heading into Wednesday's meeting of the Fed's Federal Open Market Committee, markets had been rife with speculation on when the Fed would begin curtailing the $85 billion-a-month bond-purchase program.

While the Fed decided to keep the program going at that pace for now, Fed Chairman Ben Bernanke said it would be "appropriate to moderate the monthly pace of purchases later this year" if economic data comes in as forecast.

Bernanke also said the program could be ended completely in mid-year 2014.

"It seems as though the Fed is slowly moving away from its easing cycle" said David Song, currency analyst at DailyFX.

"We will look for more clues on the pace the Fed will reduce the non-standard program as the central bank continues to drop its dovish tone for monetary policy."

Kathy Lien, managing director of BK Asset Management, said the Fed's move effectively sets a "bottom" for the US dollar.

"While the Federal Reserve has gone out of its way to say that tapering does not equal tightening, by reducing asset purchases and announcing their plans to stop buying completely, they have the exit clearly marked," Lien said.

Lien noted that other leading central banks, such as the Bank of Japan and the European Central Bank, are still in aggressive stimulus mode.

Among other currencies, the pound traded at $1.5483 Wednesday, down from $1.5645 a day earlier.

The dollar bought 0.9277 Swiss franc compared with 0.9195.

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http://www.globalpost.com/dispatch/news/afp/130619/dollar-surges-fed-bond-tapering-plans