Reuters | Sep 19, 2019 00:10
* Fed cuts rates, but gives uncertain outlook
* Fed reduces rates on excess reserves
* Dollar holds near 7-week high vs yen after Fed decision
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (New throughout, updates prices, market activity and analyst comment following Fed decision and statement)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 18 (Reuters) - The dollar firmed on Wednesday and traded near a seven-week high against the yen, after the Federal Reserve cut interest rates by a quarter of a percentage point, as expected, but gave an uncertain outlook on future easing.
The dollar touched session peaks against the yen after the Fed decision, rising in seven of the last eight sessions.
In cutting interest rates by 25 basis points for the second time this year, the Fed gave a nod to ongoing global risks and "weakened" business investment and exports.
But new projections showed policymakers at the median expected rates to stay within the new range through 2020. However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019. rate cut from the Fed to try to shield the U.S. economy from global headwinds. Today's move was more of a hawkish easing in that the Fed's median forecasts for rates suggested no more cuts this year, while some officials dissented," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"The tone of the Fed's new forecasts remained largely sanguine despite the global risks. Consequently, the dollar isn't likely to stray far from recent highs."
In mid-afternoon trading, the dollar rose 0.2% to 108.35 yen, just below a seven-week high of 108.37 yen tested overnight. The dollar index, tracking the unit against a basket of other currencies .DXY , was up 0.2% at 98.49.
The euro fell 0.3% to $1.1031 JPY=
Aside from cutting interest rates, the Fed changed two key rates used to manage its main policy lever. It lowered the interest it pays on excess bank reserves (IOER) by 30 basis points, to 1.80%. The rate now sits 20 basis points below the top of the target range, compared to 15 basis points previously. Fed also set its offering rate for any necessary operations in the $2.2 trillion repurchase agreement, or repo, market, at 1.70%, five basis points below the bottom of the new target range for the policy rate.
The changes came after turmoil this week in funding markets briefly pushed the overnight bank-to-bank lending rates above the U.S. central bank's target range.
After the Fed releases its policy decision, attention will turn to the Bank of Japan's meeting ending on Thursday, to see whether it eases policy, too.
Deepening negative rates will be an option if the BOJ eases, although the central bank may accompany that with measures to mitigate the pain on financial institutions, sources have told Reuters. bid prices at 2:33PM (1833 GMT) Description
U.S. Close Pct Change
+108.3700 +108.0900 Euro/Yen
+119.8100 +119.4200 Dollar/Swiss
+0.9927 Sterling/Dollar GBP=
+1.2440 Dollar/Canadian CAD=
+1.3240 Australian/Doll AUD=
Written By: Reuters
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