US Dollar loses as Fed pauses rate hike

15 Jun 2023 09:46am
Photo for illustrative purpose only. - FILE PIC
Photo for illustrative purpose only. - FILE PIC

NEW YORK, US - The US dollar weakened on Wednesday as the Federal Reserve held its benchmark rate unchanged at 5.00-5.25 per cent at the end of its June meeting, in line with expectations, reported Xinhua.

The dollar index, which measures the greenback against six major peers, decreased 0.07 per cent to 103.2667 in late trading, after hitting four-week lows earlier in the session.

"Holding the target range steady at this meeting allows the committee to assess additional information and its implication for monetary policy," the Federal Open Market Committee said in a statement.

The Fed also projected the economy to grow one per cent this year, higher than the estimate of 0.4 per cent in March. GDP growth estimates for 2024 were lowered by 0.1 percentage points to 1.1 per cent.

In the opening comments at his news conference, Fed Chair Powell said that nearly all policymakers expect that it will be appropriate to raise interest rates somewhat further by the end of the year.

New forecasts released alongside the decision showed that most Fed officials expect federal funds rates to rise to 5.6 per cent, suggesting two more hikes are on the horizon by December.

After the announcement of the decision, the US dollar unexpectedly surged, recovering most of the losses it had experienced prior to the decision's release.

"The slowdown of US inflation in May to 4 per cent has provided the Federal Reserve with the confidence to pause rate hikes at the 5-5.25 per cent range following ten straight rate increases since March last year," said Srijan Katyal, global head of strategy and trading services at international brokerage firm ADSS.

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In late New York trading, the euro rose to US$1.0836 from US$1.0790 in the previous session, and the British pound was up to US$1.2668 from US$1.2602 in the previous session.

The US dollar bought 139.6670 Japanese yen, lower than 140.2840 Japanese yen of the previous session. The US dollar decreased to 0.8992 Swiss franc from 0.9059 Swiss franc, and it increased to 1.3313 Canadian dollars from 1.3311 Canadian dollars. The US dollar increased to 10.7148 Swedish Krona from 10.7138 Swedish Krona. - BERNAMA - XINHUA