Dollar Rises as Fed Holds Rates, Plans Gradual Path for Hikes

Fed Officials Leave Benchmark Rate Unchanged

The dollar rose as Federal Reserve policy makers kept their benchmark interest rate unchanged and said they still expect to raise borrowing costs at a “gradual” pace while watching to see how the global economy and markets impact the U.S. outlook.

The U.S. currency rallied as policy makers maintained the target for the federal funds rate at 0.25 percent to 0.5 percent after a two-day meeting in Washington. Currency prices swings were muted the he Federal Open Market Committee said its is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

Financial markets have been gripped by volatility since the start of the year as concern grew that an economic slowdown in China would spread risk aversion around the world. A similar bout of turmoil encouraged the Fed to hold rates in September before increasing them from near zero for the first time in almost a decade last month.

"The statement reads as balanced," said Bipan Rai, director of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said from Toronto. "They’ve left the door open for March while acknowledging some strain in domestic data and international developments along with the decline in inflation expectations."

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, rose 0.1 percent to 1,249.02 as of 2:26 p.m. in New York.

“The committee recognizes the recent market disruptions and will be gradual in its rate policy going forward,” said Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE