The dollar fell on Wednesday after the Federal Reserve raised interest rates a quarter of a percentage point and signaled it may pause further rate hikes.
The dollar index fell 0.4% on the day to 101.42 after touching 101.05, the lowest level since April 26. The euro gained 0.5% to $1.1047 after hitting $1.1093. It remains just below the 13-month high of $1.1096 hit last week.
The dollar also fell 1.02% against the Japanese yen to 135.15.
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In an obvious change, The central bank no longer said it “anticipates” further rate hikes will be needed, but only that it will watch incoming data to determine whether further rate hikes “may be appropriate.”
The pause would give authorities time to assess the consequences of recent bank failureswait for the political dispute over the US debt ceiling to be resolved, and monitor inflation developments.
The Fed did not explicitly commit to ending its hike cyclehelping the dollar break past session lows hit immediately after the central bank released its meeting statement.
“Some expected an explicit pause. I don’t think it was realistic, but that’s what a pause actually sounds like”said Adam Button, chief currency analyst at ForexLive in Toronto, and expanded: “The name of the game now is to watch economic data and try to find signs of weakness in the US economy or stubborn strength.”
The April employment report, due to be released on Friday, is the main economic data for the week. The dollar rebounded briefly after news on Wednesday that US private employers boosted hiring in April with strong demand in the leisure and hospitality sector, although wage growth slowed.
Other data released Wednesday showed that the US services sector maintained stable growth in Aprilas new orders rose amid a rebound in exports, but businesses continued to face higher input prices, indicating that inflation could remain elevated.
Consumer price inflation, due next week, will also offer further clues as to whether inflation will continue to ease.
“The Federal Reserve continues to walk a tightrope, trying to find a balance between its credibility in fighting inflation and trying to achieve a soft landing,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
The European Central Bank is expected to raise rates by 25 basis points on Thursday, with a 50 basis point hike considered unlikely.
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