The dollar firmed in Asian trading Wednesday after the Federal Reserve dismissed the possibility of fresh monetary easing, which would have weakened the dollar with the aim of injecting liquidity into the financial system to pump up the economy.
Meanwhile, reports out of Germany that Chancellor Angela Merkel's government opposes strengthening a bailout fund fueled the flight to the safe and liquid greenback as well.
In 2012, a EUR500 billion European Stability Mechanism will become operational yet fears have persisted that while it may be big enough to assist countries like Greece, it won't be large enough to prop up Greece alongside bigger eurozone nations such as Italy and Spain.
Talk that Germany, one of the fund's key contributors, opposes beefing it up fueled fresh fears that the euro may be in trouble.
Furthermore, the Federal Reserve didn't rule out the possibility of snapping up assets such as Treasury bills or mortgage-backed securities from banks, known as quantitative easing, in its quarterly monetary policy statement on Tuesday.
Markets, however, interpreted the language to mean that such a move wouldn't come until well into 2012 if it does comes at all.
