Dollar Retreats As Post-Fed Meeting Glow Fades


The Fed did not raise interest rates but did announce that in October it will start reducing its big balance sheet of US securities. The central bank is widely expected to leave its benchmark interest rate unchanged at -0.10 percent.

The USD/JPY settled at 112.169, up 0.580 or +0.52%.

Some Fed officials have warned against raising interest rates until inflation - which reflects the prices of everything from meat and cheese to houses and cars - meets the goal of 2% that they consider healthy for the economy. The currency traded in a range of C$1.2236 to C$1.2302.

According to the Fed's economic projections which were released on Wednesday, Fed officials expected the United States economy to grow 2.4 per cent this year, higher than their forecast of 2.2 per cent in June. While the decision to shrink the Fed's balance sheet is much expected, when and how the Fed will manipulate its target for short-term interest rates is less clear. The bank will increase those caps by $6 billion every three months, until the bank is selling off $30 billion in Treasury bonds and $20 billion in debt each month. For the first three months, the Fed will reduce its balance sheet by $10 billion. They jumped almost 2% overnight.

The yen tends to benefit during times of crisis due to Japan's net creditor nation status, and the expectation that Japanese investors would repatriate assets. USA stocks were poised for a steady opening with Dow futures and the broader S&P 500 futures unchanged.

The Dow Jones industrial average slipped 7 points, less than 0.1 percent, to 22,363.

Asian stocks were split early on whether to rise or fall in the wake of the Federal Reserve's overnight statements on policy and economic projections. Benchmark 10-year notes fell 11/32 in price to yield 2.29 percent, up from 2.24 percent before the Fed's statement and the highest level since August 8.

The dollar index .DXY rose 0.75 percent, with the euro down 0.83 percent to $1.1892. It retraced losses and within about 15 minutes was back above the $1,300 level. The yield on the 10-year Treasury note rose to 2.28 percent.

The most active gold contract for December delivery on the COMEX division of the New York Mercantile Exchange dropped 21.6 dollars, or 1.64 percent, to settle at 1,294.8 dollars per ounce.

Crude oil prices were little changed amid a wait-and-see mood as ministers from the Organisation of the Petroleum Exporting Countries, Russia and other producers meet later on Friday to discuss a possible extension of the 1.8 million barrels per day (bpd) of supply cuts to support prices.