The dollar had been strengthening against the euro the past few weeks, but the “soft” Fed meeting statement caused the market to reverse the recent gains. (Gains for me, because our expenses at Friends of African Village Libraries in Burkina Faso are in FCFA which is tied to the euro, so stronger dollar means more libraries and books and reading programs.)
On Wednesday, the major dollar cross rates initially showed no directional trend as investors counted down to the Fed policy statement. EUR/USD was paralysed near 1.10 . USD/JPY hovered up and down in the 105 big figure. The Fed acknowledged the recent improvement in data and said that near term risks to the economic outlook have diminished. However, with no hint on the timing of a rate hike, the market considered the statement soft. US bond yields declined a few basis points and the dollar declined. EUR/USD closed the session at 1.1058 (from 1.0986). USD/JPY also declined a bit further off the intraday highs reached in Asia and finished the session at 105.40 (from 104.66).