Market Review - 02/11/2011 21:48 All times in GMT

Dollar pares intra-day loss after upbeat post-FOMC statement and avoided talk of QE3

The greenback rebounded against most of its peers on Wednesday after Federal Reserve policy makers said the U.S. economy has picked up while the "downside" risks to the economy remain. Federal Reserve Chairman Ben Bernanke avoided talk of further monetary easing in his press briefing.

Earlier, although the single currency fell sharply to an intra-day low at 1.3637 in Australia after the embattled Greek Prime Minister George Papandreou reiterated his decision to hold a referendum on the EU/IMF bailout plan, price managed to hold above Tuesday's low of 1.3608 and ratcheted higher in Asia and Europe on continued short-covering, euro later climbed to as high as 1.3829 in NY afternoon on further liquidation of short euro positions as investors remained cautious ahead of the FOMC policy statement.

However, euro retreated sharply to 1.3713 after the Fed decided to keep its rate unchanged in the range of 0-0.25% and avoided talks of QE3. Fed statement stated economic growth strengthened "somewhat" in Q3 and significant downside risks remains to economic outlook, including strains in global financial markets while Fed Chairman Ben Bernanke said 'pace of economic progress likely to be frustratingly slow; will continue to monitor European developments closely; Fed remain prepared to take action as appropriate to make sure recovery continues, prices stay stable; Fed policy is already highly accommodative, prepared to do more and has tools to do so if necessary.'

In NY afternoon, the single currency was further pressured on a report that EU and IMF sources said 'G20 sixth tranche of EU/IMF loans to Greece unlikely to be paid until Greek referendum is held; IMF board needs assurances that Greece can fulfil its programme commitments before giving any further financial support.'

In other news, A Greek government spokesman said 'Greek referendum will ask voters about bailout deal, not euro membership.'

Although the British pound fell in tandem with euro to a session low at 1.5917 in Australian morning, cable rose to an intra-day high at 1.6048 after the release of better-than-expected UK PMI data (53.9 in Oct vs forecast of 50.0 and 50.1 in Sept). However, cable retreated sharply from 1.6037 to 1.5928 after Fed's announcement.

Versus the yen, the greenback traded narrowly throughout the day. Dollar edged lower from an Asian high of 78.41 to 77.94 in European morning ahead of Fed's announcement before recovering to 78.12 in NY afternoon.

On the data front, U.S. ADP employment in Oct. was 110K vs forecast of 101K, up from 91K in Sept. German manufacturing PMI rose from 48.9 in Sept to 49.1 in Oct, forecast was 48.9. German unemployment rose by 10K in Oct to an unemployment rate of 7.0%, higher than forecast 6.9%. Eurozone PMI fell from 47.3 to 47.1 in Oct.

Data to be released on Thursday:

New Zealand employment change, unemployment rate, Australia retail sales, China non-manufacturing PMI, HSBC services PMI, U.K. services PMI, U.S. jobless claims, productivity, labour cost, durable goods (rev.), factory orders, ISM non-manufacturing, EU rate decision.