Dollar index holds near multi-year highs after Fed statement

Investing.com –

Investing.com – The dollar held steady, hovering close to more than 11-year highs against the other major currencies on Thursday, after the Federal Reserve signaled that interest rates could start to rise around mid-year.

Following its policy meeting on Wednesday, the Fed said it would keep rates on hold at least until June and reiterated its pledge to be patient on raising interest rates, while acknowledging the solid economic recovery and strong growth in the labor market.

The central bank also said it expected inflation to keep declining in the short term and added that it would take “financial and international developments” into account before deciding when to hike borrowing costs.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 94.91, not far from Friday’s more than 11-year highs of 95.77.

EUR/USD edged up 0.17% to 1.1309 after Germany’s Federal Statistics Office said the number of unemployed people declined for the fourth consecutive month in January, falling by 9,000, compared to expectations for a drop of 10,000.

The report also showed that Germany’s unemployment rate hit a record-low 6.5% in January, down from 6.6% in December, in line with expectations.

Sentiment on the euro remained vulnerable however, after Greece’s new government moved Wednesday to roll back deeply unpopular austerity policies underpinning the county’s €240 billion international bailout, fuelling fears over a clash with its international creditors.

The pound was also steady against the dollar, with GBP/USD at 1.5150 after the Nationwide Building Society reported that U.K. house price inflation rose 0.3% this month, in line with expectations, after a 0.2% uptick in December.

Year-on-year, U.K. house prices rose 6.8% in January, exceeding expectations for an increase of 6.6%, after a 7.2% gain the previous month.

USD/CHF rallied 1.75% to trade at 0.9208 and EURCHF jumped 2.10% to 1.0432 amid growing expectations that the Swiss National Bank will intervene to prevent the appreciation of the currency.

On Tuesday, SNB Vice President Jean-Pierre Danthine said it was still “fundamentally prepared” to intervene in currency markets, even after scrapping its cap.

Elsewhere, the yen slid lower, with USD/JPY rising 0.26% to 117.85.

The Australian and New Zealand dollars were lower, with AUD/USD tumbling 1.08% to fresh five-and-a-half year lows at 0.7802 and NZD/USD down 0.45% to a new four-year trough of 0.7283.

The kiwi weakened after after the RBNZ held its benchmark interest rate at a record-low 3.50% and signaled that it is prepared to lower borrowing costs further as plunging oil prices dampen inflation.

Separately, data showed that New Zealand’s trade deficit narrowed to NZ$ 159 million in December from NZ$ 285 million in November, confounding expectations for a deficit of NZ$ 48 million.

The Canadian dollar held steady at nearly six-year lows, with USD/CAD at 1.2540.

Later in the day, the U.S. was to publish the weekly report on initial jobless claims as well as private sector data on pending home sales.

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