Dollar Falls as Fed Holds Rates, Monitors Global Developmentsby
The dollar fell for a third day against the euro after the Federal Reserve kept U.S. interest rates unchanged while noting turmoil that has roiled global financial markets.
The U.S. currency weakened versus most of its major peers as policy makers maintained the target for the federal funds rate at 0.25 percent to 0.5 percent after raising it 0.25 percentage point in December. Policy makers 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.
Financial markets have been gripped by volatility since the start of the year amid concern that an economic slowdown in China would stunt growth around the world. A similar bout encouraged the Fed to hold rates in September.
"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 dollar fell 0.3 percent to $1.0902 per euro as of 2:47 p.m. in New York.
The Federal Open Market Committee 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,” the central bank said in a statement Wednesday following a two-day meeting in Washington.
"What the Fed did today was acknowledge, or reinforce, what the market and investors already knew: there is a fair amount of uncertainty," said Tom Kersting head of Edward Jones & Co. fixed-income research department in St. Louis. "The reaction has been relatively muted."