20.09.202320:51:00UTC+00Dollar Pares Losses, Climb Higher After Fed Policy Announcement

After languishing in negative territory till around mid afternoon, the U.S. dollar recovered well on Wednesday as the Federal Reserve left interest rates unchanged but projected a hike by the end of the year.

The Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.5% after raising rates by 25 basis points in July. However, the central bank's latest projections suggest Fed officials expect one more rate hike this year, forecasting a median rate of 5.6% by the end of 2023.

The latest projections also indicate officials expect rates to remain higher for longer than previously anticipated. The central bank has raised interest rate forecast to 5.1% at the end of the year from 4.6% in June, and the outlook for rates at the end of 2025 to 3.9% from 3.4%.

The Fed's statement said economic activity has been expanding at a "solid pace" compared to the "moderate pace" described in July.

The Fed's next monetary policy meeting is scheduled for October 31-November 1, with CME Group's FedWatch Tool currently indicating a 73.6% chance rates will remain unchanged and a 26.4% chance of a quarter point rate increase.

The focus has now shifted to policy meetings of the Bank of England, Bank of Japan and Swiss National Bank.

The dollar index, which fell to 104.67 by early afternoon, climbed to 105.44 after the central bank's policy announcement. The index was last seen at 105.35, up 0.14% from the previous close.

Against the Euro, the dollar firmed to 1.0660 from 1.0739. Against Pound Sterling, the dollar is up at 1.2343, gaining from 1.2422.

The dollar is up against the Japanese currency, fetching 148.28 yen a dollar. Against the Aussie, the dollar is up marginally at 0.6447, and against Swiss franc, it is stronger by about 0.13% at CHF 0.8988.

The dollar climbed against the Loonie as well, firming to C$ 1.3480, before easing to $ 1.3465.