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US dollar hits 13-month low after Fed adjusts statement
[NEW YORK] The US dollar fell on Wednesday, touching its lowest level in more than a year against a basket of currencies after the release of the Federal Reserve's policy statement following its July meeting.
The Federal Open Market Committee announced no changes to monetary policy, as expected. Policymakers said, however, that the US central bank would begin implementing balance sheet normalisation "relatively soon".
That marked a change from the committee's previous statement that it would begin to reduce its US$4.5 trillion bond holdings "this year".
The US dollar index, which measures the greenback against six major currencies, fell to 93.396, its lowest since June 23, 2016.
"In our mind, 'relatively soon' is consistent with (a balance sheet reduction in) September, but there could've been a hope for stronger language or a more clear signal for September," said Vassili Serebriakov, FX strategist at Credit Agricole.
"Maybe the market sees September as somewhat of a question mark. We don't. But 'relatively soon' could be open to some interpretation."
While the statement did seemingly set the Fed up to begin paring its balance sheet as soon as its next meeting in September, the lack of surprise allowed the market to revert to the trend of US dollar weakness seen before the statement's release.
"There's just a lot of momentum in dollar selling in general," Mr Serebriakov said.
"Once the statement was out of the way and didn't really give any reasons to buy the dollar, the market tried to push for new highs in some of the other currencies."
The US dollar index has fallen about 4 per cent over the last month and more than 8.5 per cent this year.
Analysts also pointed to technical trading levels that were breached once the US dollar began to fall, triggering more selling and a further decline in the greenback.
The euro, which had been bumping up against a 23-month high for most of the week, pushed through that mark to touch US$1.1739, its highest since Jan 15, 2015.
The US dollar fell to a more than two year low against its Canadian counterpart, dropping to C$1.2416, its lowest since June 30, 2015.
Against the yen, the US dollar dropped 0.6 per cent to 111.21 yen, reversing early gains.
The US dollar also surrendered its early rise versus the Swiss franc, last down 0.1 per cent at 0.9514 franc.