Dollar tumbles after Fed holds rates steady

In early US trading, the Dow Jones industrial average fell 10.79 points, or 0.06 per cent, to 16,729.16, the S&P 500 declined 0.2 points, or 0.01 per cent, to 1,995.11 and the Nasdaq Composite shed 8.01 points, or 0.16 percent, to 4,897.24.

U.S. money market futures hardly moved, still pricing in about one-in-four chance of a rate hike on Thursday. Surveys carried out this week suggest that around 50% of respondents believed that the Fed will announce at 1900hrs BST this evening that it will be increasing its headline interest rate for the first time in almost a decade. Instead, the dollar has been on a rocky ride, as investors have repeatedly re-calibrated their expectations for US growth and the timing of a Federal Reserve (the Fed) rate hike.

Analysts said the Fed officials were concerned about the unrealised target of 2-percent inflation, and they may wait until the next year to raise interest rates.

“The general message is [that] things are getting better but we are not there and are more focused on the risks”, said Steven Englander, global head of G-10 FX strategy at Citi.

The Federal Open Market Committee kept the federal funds rate at between zero and 0.25 percent, saying “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term”, and lowered its projections for the benchmark rate.

The pan-European FTSEurofirst 300 index was little changed at 1,428.27, while the Iseq was ahead by 0.4 per cent.

Woolworths shares rose 0.7 per cent to $24.70 a day after falling to its lowest share price in three years.

Wall Street gave up a more than 1 percent rally on Thursday as investors struggled to interpret the Federal Reserve’s decision to hold off on raising interest rates. Silver jumped 3.9 percent to $14.96 per ounce, its highest level in more than three weeks.

The dollar dropped to two-week lows versus the Swiss franc, and it last traded at 0.9598, down 1.2 percent.

Retail group Premier Investments Ltd. reported a 21 percent increase in full-year net profit on higher sales and margins. Telstra meanwhile rose just 0.2 per cent to $5.59.