Dollar Bounces Back As Market Settles Over Fed Decision

Dollar Bounces Back As Market Settles Over Fed Decision

The dollar regained momentum today against major currencies but remains weaker against the Japanese Yen. The strength in the greenback came today after a two-day slump following the Federal Reserve’s extra dovish comments this week. The currency remains volatile against the yen as market participants look forward to U.S. consumer sentiment data, which is due to be published later today.

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Dollar gains strength

EUR/USD lost 0.40% to 1.1271 during the late Asian hours while the British Pound plunged 0.35% to 1.4430 today. The U.S. dollar had slipped 0.08% to 111.29 against the safe haven yen today but gained 0.23% against the Swiss Franc.

The dollar suffered steep losses yesterday as the market reacted to the Federal Reserve’s outlook for monetary policy. The central bank kept the rates unchanged and said that the probability of the number of rate hikes has been reduced to two from four.

The Fed cautioned about the prevalence of global economic uncertainty, but it remains optimistic that the moderate growth and strong employments numbers will provide it room to tighten policy later in the year.

Meanwhile, data published by the U.S. Department of Labor said on Thursday that unemployment figures rose slower than anticipated during the last week. At the same time, the Federal Reserve Bank of Philadelphia reported that the manufacturing index reading jumped to 12.4 in March from -2.8 in February, indicating expansion.

BOJ Minutes

On the other hand, the minutes of the Bank of Japan’s policy meet in January showed that the policymakers had initially proposed two measures, one being the expansion of the asset-buying program and the other being negative interest rates to asset purchases.

Apparently, the consensus was formed on adoption of negative interest rates as many believed that the negative interest rate policy would help in diffusing the deflationary mindset prevalent in Japan.

The U.S. Dollar Index inched up by 0.30% to 95.05 during today’s early morning trade.