The U.S. dollar fell on Wednesday, erasing an earlier gain after the Federal Reserve was seen as striking a somewhat cautious note on inflation, which is seen as bearish for greenback.
The U.S. central bank said inflation was “running below 2%” instead of “running somewhat below 2%,” as it had in its June statement.
The Fed also indicated, as expected, that it would start to wind down its bond holdings “relatively soon” and kept interest rates unchanged, as had been widely expected.
“The market is trying to gauge how concerned the Fed is, or is not, about not hitting the 2% target. The perception of its concern changes over time, and in this case that is having a negative impact on the dollar,” said Eric Stein, a vice president at Eaton Vance Management who covers the Federal Reserve. “There’s nothing that really stands out in this statement, but between this and [Fed Chairwoman Janet] Yellen’s previous comments, it seems like there’s some concern on the inflation side.”
Source: Bloomberg Pro Terminal
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