Dollar near 4-month highs, recovers from post-Fed dip

Dollar near 4-month highs, recovers from post-Fed dip

The Federal Open Market Committee kept the fed funds rate unchanged as expected in a range of 1.5 percent to 1.75 percent at the end of its two-day policy meeting and said it expected inflation to hold near its 2 percent target, even hinting it would tolerate an overshoot with a reference to its target being "symmetric".

"We are no longer seeing better-than-expected data".

The world's most influential central bank gave little away in terms of guidance about future policy moves, but the market is now pricing in four increases by the Fed this year, instead of the three previously expected. "Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 per cent objective over the medium term", officials said, adding that the risks to the outlook were "roughly balanced".

"The risk at the moment is that the increasing uncertainty could create ambiguity in executives' heads, it makes corporate decision-making more hard and then (leads to) a decline in investment", Alastair George, chief investment strategist at Edison Investment Research, said.

On Monday, the Commerce Department reported that inflation using the Fed's preferred measure reached 2 percent for the 12-month period ended March 31.

"Rising inflation expectations, an overall bullish commodity trend (late-cycle preference for commodities), geopolitical and financial risks are being offset by a rising dollar and rising real-rates", Saxo Bank analysts said in a note.

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The pace of rate increases has picked up since the central bank began its tightening cycle in December 2015.

The dollar index, which tracks the greenback against six major peers, was down 0.15 percent at 92.314 in late trading.

Payroll gains in the US probably picked up in April, with the unemployment rate forecast to drop to 4 percent, according to surveys of economists before the data reports due Friday. Executives at some big American companies are getting unsettled by Donald Trump's sabre-rattling over trade. China, in response, has said it will impose its own tariffs on American products. A Trump administration delegation is scheduled to visit Beijing on Thursday and Friday for talks with top Chinese officials. Currency markets mostly overlooked Wednesday's economic data out of the Eurozone in favour of broader trends, namely the widening interest rate differentials between the Euro-area and US. Apple shares were up 4.4 percent.

Germany's DAX Index sank 0.9 percent.

US Treasury yields for most maturities fell as a quarterly refunding program that aims to finance the country's massive fiscal deficit came in short of expectations.

The US Treasury is scheduled to announce its findings from a refunding survey on Wednesday, with analysts projecting an increase in auction sizes, or new issuance at different points on the yield curve. This, too, is at its highest level in a long time and broadly consistent with prices growing by 2% each year. The US crude oil rose 0.68% to 67.71 United States dollars per barrel.

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