The U.S. dollar erased a brief rally and retraced
modest losses against the euro on Wednesday,
hitting a nearly one-week low against the currency in
the process, after a Federal Reserve statement
reinforced expectations for just two interest rate
increases this year.
The U.S. central bank held interest rates unchanged
and, while it left the door open to a hike in June, its
statement implied it was in no hurry to follow on
from its December rate rise.
While the Fed added that global economic headwinds
remained on its radar, it removed a specific reference
from its last policy statement to the risks they posed,
a move analysts viewed as slightly more hawkish.
Analysts said the dollar initially rallied against the euro on the removal of the reference to global risks, but
the statement was not a decisive enough change from March's dovish statement to sustain that rally. The
Fed projected two quarter-point rate hikes this year in March, half the number seen in December.
"The comments did not change the direction of the dollar because the two rate hikes by the Fed remain
intact," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last
down 0.11 percent at 94.474. That level was roughly unchanged from where the index stood before the
Fed statement.
The euro turned slightly negative against the dollar and hit a session low of $1.1274 immediately after the
statement, but quickly retraced gains and hit a six-day high of $1.1361. The euro was last up 0.12 percent
at $1.1312.
The dollar remained slightly higher against the yen, or roughly unchanged from before the Fed statement.
The dollar was last up 0.12 percent against the yen at 111.40 yen after briefly touching a session high of
111.75 yen immediately after the statement.
Analysts said uncertainty over a Bank of Japan policy statement due on Thursday kept the dollar's activity
against the yen muted. The central bank is expected to increase its stimulus measures in a bid to weaken
the yen.
"People are generally trying not to overreact (to the Fed) when you could have big news coming out" in
Japan, said Stephen Simonis Sr., independent analyst for FXDD Global in Jersey City, New Jersey
