The Federal Reserve policy statement on Wednesday essentially maintained the status quo with investors speculating with greater certainty that the Fed is ready for a rate hike later in the year. The Fed did issue some cautions about the possible headwinds the US economy might be facing as a result of a miss in inflation projections and the difficulties faced in other major economies such as China, Japan and the Eurozone, but overall the expectations are for a 2015 rate hike. Analysts pointed out that the Fed’s highlighting of the policy divergence in fact made the greenback a much more attractive investment opportunity.
As reported at 9:12 am (GMT) in London, the EUR/USD was trading at $1.1290, essentially unchanged, while the USD/JPY was trading at 117.775 Yen, a gain of 0.2%. The U.S. Dollar Index was trading higher at 94.6830 .DXY; the Dollar Index is a weighted composite of major currencies which investors use to assess the greenback’s relative strength.
RNBZ Flip Flops on Rate Outlook
In New Zealand, the Reserve Bank hinted at a possible rate cut, sending the Kiwi Dollar to a 4-year trough against the greenback. Analysts recall that only about a month ago, the RBNZ had indicated that there could be a rate hike ahead. The NZD/USD was trading at $0.7313 recovering from a 4-year trough at $0.7297.