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Dollar slides as Fed lowers rate hike forecasts
The US dollar tumbled late on Wednesday after the Federal Reserve announced its monetary policy decision. The Fed target fewer rate hikes this year as it noted that the US economy faces risks from an uncertain global economy, even though it acknowledged that there was moderate growth and “strong job gains” in the economy.
The Federal Open Market Committee (FOMC) kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent. They decided to halve the rate forecast to two from four hikes by the end of this year and it ruled out negative interest rates. Many analysts expect a rate hike by June.
Following the Fed’s announcement, the dollar plunged to a one-week low of 112.33 yen and then continued lower during the Asian session on Thursday to reach 111.93 yen, the lowest in three weeks.
The euro was propelled to a one-month high against the dollar to reach $1.1244 after the Fed announcement. The pair consolidated gains in Asia.
Sterling rose about 0.1 percent to $1.4273 and steadied around those levels. The pound’s gains were capped as there is an important risk event today for the currency – the Bank of England meeting. Yesterday the pound fell after the UK Budget statement showed that growth in Britain was cut to 2% in 2016 from a previous estimate of 2.4%.
The Australian dollar added to post-FOMC gains after data showed the Australian unemployment rate fell to 5.8% from 6%. The aussie rose to 0.7620 after the data, the highest level since June last year.
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