US dollar steady as Fed keeps rates unchanged

[NEW YORK] The US dollar held steady Wednesday after the Federal Reserve said it was leaving short-term interest rates unchanged and cracked open the door to a rate hike in June.

The Federal Open Market Committee, the US central bank's policy arm, announced it was standing pat on ultra-low 0.25-0.50 per cent for its benchmark federal funds rate, as expected, after raising it in December after seven years near zero.

The FOMC statement indicated policymakers were more optimistic about global economic conditions than they were in their March meeting as they noted a mixed picture for the US economy.

In March the FOMC said international economic and financial developments "pose risks." In the new outlook, it simply said that it would continue "to closely monitor inflation indicators and global economic and financial developments."

"The language of the statement signaled that the probability of a rate hike at the June meeting is stronger now than it was at the March meeting. Unless economic data deteriorates unexpectedly, the Fed has enough to justify a rate hike in June," said IHS Global Insight economists in a client note.

The FOMC decision had only a small net effect on the dollar. Around 2100 GMT, the greenback traded at US$1.1321 per euro, down a modest 0.2 per cent from the same time Tuesday.

The yen ticked lower against the dollar and the euro as the Bank of Japan opened a two-day monetary policy meeting.

The Japanese central bank is widely expected to announce more stimulus Thursday for the flagging economy. Deadly earthquakes earlier this month have led to temporary factory shutdowns at a time when the world's third-largest economy is already struggling.

AFP