Dollar Down on Fed Frustrating Statement

The dollar declined versus a number of currencies today after the Federal Reserve signaled interest rates will remain low for a longer period, declining attractiveness for the U.S. currency in foreign exchange markets.

After 2 weeks rallying versus most of the currencies, the dollar cooled down today after a Federal Reserve statement reiterating the position of leaving borrowing costs at a record low for an undefined period, affecting negatively speculations that rate hikes could follow sooner-than-expected, which caused one of the sharpest dollar rally this year that jumped from a 15 month low to a 2 month high since the beginning of December. The Australian dollar was also affected today by a negative sentiment after policy makers affirmed that further rate hikes are unlikely, declining slightly the attractiveness for the South Pacific currency, one of the best performers in currency markets this year.

Even if the Fed halted speculations regarding rate hikes, positive reports are an evident sign that conditions in the U.S. are improving, and that allows more flexibility for the central bank to change its monetary policy, which is still favorable for the greenback.

EUR/USD traded at 1.4579 as of 12:14 GMT from a previous rate of 1.4518 yesterday. GBP/USD traded at 1.6374 from 1.6253.

If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.