Forex Review – Dollar rises after FOMC meeting

Important: This page is part of archived content and may be outdated.

The dollar surged against the yen after the FOMC policy meeting statement, which gave a better assessment of the United States economy. In the statement the Fed is “recognizing that economic conditions are slightly better but not enough to shift its stance.” Interest rates were left unchanged at the zero to 0.25 percent range, where they have been since December 2008, and its asset buying program was left unchanged.

The markets interpreted the Fed statement as no quantitative easing for now, which would normally have weakened the dollar. Dollar strength was also reinforced by strong US retail sales figures. Sales rose 1.1 percent in February to hit a five-month high and beat expectations of a 1.0 percent increase. Last month’s rise in sales was higher than January’s 0.4 percent rise.

USDJPY shot up to a new eleven-month high of 83.07 in the US session, steadily rising since an early day low of 81.95.

Euro was pressured due to dollar strength, resulting in a lower EURUSD, which erased earlier gains to fall back down to 1.3055 from a New York session high of 1.3121.

Sterling had a choppy day, initially supported by UK trade data that showed the goods trade deficit widened by less than expected in January. But the pound struggled to maintain gains after a stronger dollar  GBPUSD moved off lows of 1.5619 to reach 1.5746 in the New York session before easing to 1.5675 post-Fed meeting.

The ICE dollar index, which measures the dollar against a basket of six major currencies, increased to 80.231, compared to 79.869 in late Monday US trading hours.

Gold priced in USD tumbled after the Fed policy statement. Spot gold prices fell from a session high of  $1,701.20 down to $1,661.63.