USD Falls as Fed it May Wait on Rate Hike

The U.S. dollar slid on Wednesday while Wall Street stocks rose in volatile afternoon trading after the Federal Reserve signalled it may wait until late this year to raise interest rates.

The Fed has said it would first raise rates when it deems the economy strong enough to handle it, and on Wednesday said the economy was likely strong enough to support a rate hike by the end of the year. The U.S. central bank also lowered expectations for 2015 economic growth.

Analysts are torn on whether the first rate hike in about 10 years will occur in September or December, but some took Yellen’s comments to imply it could be December.

“It’s a very cozy statement, and so far as when we do this it’s going to be gentle, we might need to keep rates low for a long time. It’s reiterating everything Janet Yellen has tried embody in the last couple of years,” said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut.

The U.S. dollar index, which measures the greenback against a basket of currencies, sank 0.8 percent. The benchmark 10-year U.S. Treasury note rose 1/32 in price, pushing the yield down to 2.3111 percent.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza