Dollar in Funk as Fed Preaches Patient Approach to Rate Hikes
The U.S. dollar fell sharply against its rivals as the Federal Reserve left interest rates unchanged and vowed to keep the brakes on further rate hikes amid concerns about slowing growth and subdued inflation.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.47% to 95.37.
In a dovish move, the Federal Reserve kept rates unchanged and opted for a more cautioned tone in its monetary policy statement.
The central bank ditched its preference to continue with "gradual" rate hikes, saying it can hold off on monetary policy tightening following a slowdown in global growth and muted inflation pressures.
"In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes," the Fed said.
The Fed also said it was open to adjusting its balance sheet normalization if economic conditions called for a more robust response beyond simply adjusting its benchmark rate.
The decision to leave rates alone arrived just hours after data showed ongoing weakness in the underlying U.S. housing market.
The National Association of Realtors said pending home sales fell 2.2% to 99 last month. That was the lowest reading since April 2014.
Elsewhere, the pound recouped some of its losses against the greenback from a day earlier. Investors continue to bet that a no-deal Brexit will be avoided despite a key amendment to the Withdrawal Deal failing to win enough votes in Parliament on Tuesday.
U.K. lawmakers on Tuesday rejected an amendment that would have postponed the Britain's scheduled departure date of March 29.
GBP/USD rose 0.35% to $1.3312, while EUR/USD rose 0.46% to $1.1484.
USD/CAD slumped 0.88% as rising oil prices underpinned the loonie, limiting gains in the pair.
USD/JPY fell 0.39% to Y108.95.