Forex - Dollar drops as Fed announces open-ended stimulus measures

Investing.com - The dollar fell against most major currencies Friday after the Federal Reserve announced plans to stimulate the U.S. economy with open-ended quantitative easing.

In U.S. trading on Friday, EUR/USD was up 0.92% at 1.3112.

The Federal Reserve on Thursday announced plans to buy USD40 billion in mortgage-backed securities a month from banks on an ongoing basis until the economy improves, a policy measure known as quantitative easing.

The Fed also said it would continue with its Operation Twist program that sees the U.S. central bank selling short-term Treasury holdings in the market while simultaneously buying longer-term instruments with the aim of keeping interest rates low.

The Federal Reserve will inject a total of USD85 billion a month into the economy a month via its combined stimulus measures that will weaken the greenback to spur recovery.

The Fed also said conditions meriting low interest rates will likely last through mid-2015.

Elsewhere in the U.S. on Friday, the country's month-on-month consumer price index rose 0.6% in August from 0.0% July.

Analysts had expected CPI to rise 0.5% in August.

Month-on-month core inflation rates rose 0.1% in August compared to 0.1% in July, falling short of market forecasts for 0.2% growth.

Industrial production in the U.S. contracted 1.2% in August compared to a revised 0.5% expansion in July.

Analyst were forecasting industrial production to expand by 0.2% in August.

Consumers, meanwhile, are more upbeat these days, separate data showed.

Thomson Reuters/University of Michigan's index on consumer sentiment hit 79.2 in September, up from 74.3 in August.

Analysts were expecting a 74.0 reading.

U.S. retail sales figures outpaced expectations as well.

The U.S. Commerce Department said that retail sales rose to a seasonally adjusted 0.9% in August from 0.6% in July, whose figure was revised down from 0.8%.

Analysts had expected retail sales to rise 0.7% in August.

Core retail sales rose 0.8% in August, matching July's 0.8% growth figure.

Analysts had expected U.S. core retail sales to rise 0.6% last month.

While weak across the board, the dollar rose against the Japanese yen, however, after Finance Minister Jun Azumi said Japan may be ready to take steps to further weaken the yen.

The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.40% at 1.6220.

The dollar was up against the yen, with USD/JPY trading up 1.02% at 78.28, and down against the Swiss franc, with USD/CHF trading down 0.86% at 0.9274.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD trading up 0.25% at 0.9709, AUD/USD up 0.13% at 1.0560 and NZD/USD trading down 0.23% at 0.8290.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.44% at 79.03.