U.S. Dollar Slips After Fed Keeps Easy-Money Policy
The US dollar weakened against some other major currencies Wednesday after the Federal Reserve held unchanged its ultra-loose monetary policy, which tends to weigh on the greenback.
The euro bought $1.3301 around 2100 GMT, up from $1.3261 at the same time on Tuesday.
The dollar slipped to 97.92 yen from 98.02 yen the prior day.
The euro, meanwhile, edged higher against the Japanese currency to 130.24 yen from 129.99 yen.
The dollar gained strength after the government reported in the morning that second-quarter gross domestic product (GDP) growth came in at 1.7 percent, better than the 1.1 percent pace expected on average by analysts.
But it lost steam after the Federal Reserve’s Federal Open Market Committee wrapped up a two-day monetary policy meeting declaring no change in the central bank’s near-zero federal funds interest rate or $85 billion-a-month bond-buying program, citing “modest” economic growth.
“The US dollar rally following the better-than-expected 2Q GDP report was short-lived as the FOMC struck a rather dovish tone for monetary policy,” said David Song, currency analyst at DailyFX.
The Fed policy tends to weaken the dollar’s value against other currencies.
For Song, the panel’s statement suggested “it may take a little longer for the FOMC to taper its asset-purchase program as it retains a qualitative approach for monetary policy.”
Omer Esiner, of Commonwealth Foreign Exchange, said the FOMC statement was slightly more pessimistic about the economy in that it described growth in the first half of the year as “modest,” compared with the prior statement’s “moderate” assessment.
“The statement keeps the outlook for Fed monetary policy very dependent on upcoming economic data. Consequently, Friday’s payrolls report is shaping up to be a make-or-break report for the idea of a September taper in the Fed’s bond purchases,” Esiner said.
If July job creation comes in above 200,000 that would “likely cement expectations for a near-term reduction in Fed stimulus and prove very beneficial for the greenback.”
The dollar also ticked down against the Swiss currency, to 0.9259 franc from 0.9295 franc Wednesday.
The pound slipped to $1.5205 from $1.5239.