By Sinéad Carew
NEW YORK (Reuters) – The dollar was lower against the yen and the euro on Wednesday after first gaining ground when the U.S. Federal Reserve raised interest rates by half a percentage point as expected and said it would need to continue to raise rates.
The greenback reversed course and retreated when Fed Chair Jerome Powell took questions. The Fed projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023 as well as a rise in unemployment and a near stalling of economic growth.
Ahead of the Fed meeting, lower-than-expected inflation data had led some investors to hope that Powell would take a more dovish tone at Wednesday’s press conference. But Powell said it was too soon to talk about the U.S. central bank’s cutting interest rates and that the Fed’s focus was on setting policy that would return inflation to its 2% goal over time.
“This is a more hawkish set of communications than markets expected. Policymakers dashed hopes for a sustained easing in financial conditions by maintaining previous language saying that ‘ongoing increases’ would be needed to put policy on a sufficiently restrictive footing,” said Karl Schamotta, chief market strategist at Corpay.
“By raising terminal rate projections to 5.1% and avoiding a sharp drop in longer-term rate expectations, officials refused to back down from the ‘higher-for-longer’ message that has been articulated for months,” he said. “On balance, this suggests we will need to see more conclusive evidence of an easing in inflation pressures before the Fed ‘pivots’ in any meaningful way.”
The euro was last up 0.43% against the dollar at $1.0674. The dollar was down 0.24% at 135.235 yen. Sterling was last up 0.54% against the dollar at $1.2429.
The dollar index, which measures the greenback against a basket of major currencies, was recently down 0.39%.
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Currency bid prices at 3:29PM (2028 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0674 $1.0630 +0.43% -6.10% +$1.0695 +$1.0619
Dollar/Yen 135.2350 135.5700 -0.24% +17.48% +135.9850 +134.5300
Euro/Yen 144.34 144.16 +0.12% +10.77% +144.5800 +143.5500
Dollar/Swiss 0.9239 0.9286 -0.52% +1.28% +0.9296 +0.9216
Sterling/Dollar $1.2429 $1.2365 +0.54% -8.07% +$1.2446 +$1.2345
Dollar/Canadian 1.3544 1.3544 +0.01% +7.13% +1.3612 +1.3520
Aussie/Dollar $0.6864 $0.6858 +0.12% -5.55% +$0.6881 +$0.6812
Euro/Swiss 0.9862 0.9873 -0.11% -4.89% +0.9890 +0.9832
Euro/Sterling 0.8586 0.8599 -0.15% +2.21% +0.8616 +0.8577
NZ $0.6449 $0.6463 -0.11% -5.68% +$0.6469 +$0.6404
Dollar/Dollar
Dollar/Norway 9.7310 9.7885 -0.66% +10.38% +9.8040 +9.7205
Euro/Norway 10.3841 10.3788 +0.05% +3.71% +10.4320 +10.3406
Dollar/Sweden 10.1658 10.2191 +0.04% +12.71% +10.2515 +10.1524
Euro/Sweden 10.8446 10.8402 +0.04% +6.03% +10.8852 +10.8405
(Additional reporting by Saqib Iqbal Ahmed and Alden Bentley in New York, Alun John and Amanda Cooper in London, Ankur Banerjee in Singapore; Editing by Alexander Smith, Kirsten Donovan, David Evans and Cynthia Osterman)
