Dollar falls broadly after Fed stands pat on its rate decision: Sept 22, 2016

Market Review - 21/09/2016  22:14GMT  

Dollar falls broadly after Fed stands pat on its rate decision

The greenback ended the day lower against majority of its peers after the Federal Reserve left its rates unchanged and its hint of hiking rates later this year failed to lift the buck. 

Fed said 'case for future rate increase has strengthened; Fed's 7-3 decision says it held rates steady only for the time being, with 14 of 17 policymakers seeing at least one hike by the end of the year; near-term risks to the economy appear roughly balanced; labor market had continued to strengthen with solid job gains, and economic activity has picked up since the first half of the.'  

Versus the Japanese yen, despite the greenback's brief spike down to 101.02 in Asia after BoJ's unchanged rate decision, price rallied to an intra-day high at 102.78 ahead of European open on the central bank's new stimulus measures. However, dollar pared its gains and tumbled to 100.54 in New York morning as investors were skeptical about the measures, then lower to 100.30 after Fed left its rate unchanged.  

The BOJ maintained the 0.1% negative interest rate it applies to some of the excess reserves that financial institutions park with the central bank. 

But it abandoned its base money target and instead set a "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields around current levels of zero percent.  

The BOJ said it would continue to buy long-term government bonds at a pace so that the balance of its holdings increases by 80 trillion yen ($781 billion) per year. 

The single currency remained under pressure in Asia and dropped to session low at 1.1123 ahead of European open before rebounding to 1.1159 in Europe, then rallied briefly to intra-day high at 1.1197 in New York afternoon after Fed's decision before retreating. 

The British pound fell to a fresh 1-month low at 1.2946 in Asia before staging a strong rebound to 1.3013 at New York open. Later, cable rallied in tandem with euro to an intra-day high at 1.3046 on Fed's rate decision before retreating again.  

In other news, Fed's Yellen said 'case for increase in rates has strengthened;decided to wait for further evidence towards objectives; economic growth appears to have picked up; household spending continues to be key source of growth; fed expects economy to expand at moderate pace over next few years; most measures of labor market slack have shown little change this year; fed continues to expect labor market to strengthen over time; overall consumer price inflation still short of 2 pct objective; expects core inflation to rise to 2 percent on back of strong job gains over next 2-3 years; says inflation expectations reasonably well anchored; fed is fully committed to achieving 2 pct inflation objective; decision not to raise rates does not reflect lack of confidence in economy; didn't raise rates at this week's meeting due to labor market slack and low inflation; fed's cautious approach all the more appropriate given rates near zero; neutral rate is currently quite low by historical standards; currency monetary policy should be viewed as modestly accommodative.'  

Data to be released on Thursday:  

New Zealand interest rate decision, France business climate, Eurozone consumer confidence, U.K. CBI industrial trends survey, U.S. national activity index, initial jobless claims, monthly home price, existing home sales, leading index and KC Fed manufacturing index.