By: Hillel Fuld
The USD inched higher versus the Japanese currency and EUR on Wednesday after the Wall Street Journal exposed the U.S. Federal Reserve was more than likely to reveal plans for gradual Treasury acquisitions at its policy meeting next week.
The newspaper claimed the Fed is likely to reveal a program of U.S. Treasury bond buys worth a few hundred billion dollars over a period of a few months.
What the Journal report dubbed a "measured approach" compares with investors' base-case scenario of an initial commitment to purchase at least $500 billion in Treasury debt.
In a recent Reuters survey earlier in October, U.S. primary dealers' predictions for the size of the Fed's expected quantitative easing had ranged from $500 billion to $1.5 trillion.
"The market has had in mind a figure of $1 trillion or more and we had been in a situation where that had led to dollar weakness," said Masafumi Yamamoto, chief FX strategis for Barclays Capital.
"Compared to that, the initial size may seem small," he said, concluding that the report could cause some market players to cover their short dollar positions.
The WSJ said the Fed could leave open the possibility of more buying in the future. Or it could halt the initiative if the economy or inflation took off surprisingly, the newspaper said.
The EUR declined 0.2 percent to $1.3834, having slipped to as low as $1.3815 earlier.
The EUR also has an option barrier at $1.3800, a break of which could open some options for a test of its recent low near $1.3700, said a trader for a Japanese brokerage firm.
Traders, however, may be careful about chasing the euro lower after it rebounded sharply last week following its hitting that trough near $1.3700, the trader said.
The USD rose 0.2 percent to 81.63 yen, pulling further away from a 15-year low of 80.41 yen struck on trading platform EBS earlier this week.