NEW YORK- The dollar fell on Wednesday after the US Federal Reserve moved to a hawkish monetary policy but without delivering a tougher surprise that might have added to its weeks-long momentum.
The dollar index, which had gained 3 percent since the start of the Russia-Ukraine war on Feb. 24 and 10 percent since May, fell as much as 0.6 percent on Wednesday as traders parsed Fed statements following a two-day meeting.
“There were no additional hawkish surprises,” said Erik Bregar of Silver Gold Bull Inc, adding that traders seemed to have been expecting too much more from the Fed. “That explains why some of these hawkish bets are being pared back a bit,” he said.
The dollar lost value to the euro and the British pound, both of which had been up earlier in the day on hope for a compromise in Russia and Ukraine peace talks.
The euro and pound both gained 0.7 percent, with the euro trading at $1.1032.
The Fed raised interest rates by the expected quarter of a percentage point and projected its policy rate would reach a range of 1.75 percent to 2 percent by the end of this year and 2.8 percent next year.
Strategists at Wells Fargo Securities called the Fed comments “very hawkish,” in a note to clients and said it should be good for the dollar going forward.
The decline in the dollar index was surprising and could reflect disappointment that the Fed rhetoric was not more hawkish, they said.
