- Fed officials see two more U.S. rate increases in 2018
- Emerging market currencies weaken after Fed's latest rate hike
- Euro pares gains after FOMC, ahead of Thursday's ECB meeting
(Updates market action after Fed rate hike)
The dollar ended steady to modestly higher on Wednesday, hitting a three-week high against the yen, as Federal Reserve officials saw the likelihood of two more interest rate increases for a total of four in 2018 based on a solid economic outlook.
The greenback's bounce tied to the Fed's perceived hawkish stance faded as traders booked profits in advance of the European Central Bank's meeting on Thursday, where policy-makers may discuss the timing of winding down its 2.55-trillion-euro bond-purchase program.
"It's the nature of a volatile market we are facing now. Europe ultimately has a bit more to worry about than we do," said Juan Perez, currency trader at Tempus Consulting in Washington.
The U.S. central bank as expected lifted key overnight borrowing costs by a quarter percentage point for a second time this year, to between 1.75 and 2.00 percent. It also ended its pledge to keep rates low enough to bolster the economy for "some time" and signaled it would tolerate above-target inflation at least through 2020.
"The probability attached to two more hikes is likely to rise and push the dollar higher in tandem," said Daragh Maher, head of U.S. FX strategy at HSBC Securities USA in New York.
In late trading, the dollar was flat against the yen at 110.50 yen JPY= after touching a three-week peak at 110.84 shortly after the release of the Fed's latest policy statement.
The greenback finished 0.44 percent lower versus the euro EUR= at $1.1795.
Some traders speculate the ECB may offer clues on its intentions to begin tapering its bond purchases this year at its upcoming meeting, while other traders reckon ECB officials may refrain from signaling changes to its stimulus program given Italy's fragile political situation and a recent spate of disappointing data in the euro zone.
The dollar was steady against sterling at $1.3381 GBP=D3 and ended modestly stronger against the Swiss franc CHF= and Canadian dollar CAD=D4 .
Some emerging market currencies weakened versus the dollar on the possibility of a Fed rate hike, while others rose. Some developing countries with large external financing needs are particularly vulnerable to rising dollar funding costs.
The Turkish lira TRY= was down over 1 percent at 4.6485 per dollar, while South Africa's rand ZAR= firmed nearly 0.1 percent at 13.3192 per dollar.
======================================================== Currency bid prices at 3:58PM (1958 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1794 $1.1743 +0.43% -1.68% +1.1801 +1.1727 Dollar/Yen JPY= 110.2600 110.3600 -0.09% -2.14% +110.8400 +110.2700 Euro/Yen EURJPY= 130.07 129.62 +0.35% -3.78% +130.3400 +129.6200 Dollar/Swiss CHF= 0.9847 0.9866 -0.19% +1.07% +0.9895 +0.9841 Sterling/Dollar GBP= 1.3378 1.3370 +0.06% -0.99% +1.3390 +1.3310 Dollar/Canadian CAD= 1.2985 1.3013 -0.22% +3.24% +1.3051 +1.2955 Australian/Doll AUD= 0.7576 0.7571 +0.07% -2.88% +0.7609 +0.7531 arEuro/Swiss EURCHF= 1.1615 1.1587 +0.24% -0.63% +1.1622 +1.1587 Euro/Sterling EURGBP= 0.8813 0.8781 +0.36% -0.79% +0.8826 +0.8780 NZ Dollar/Dolar NZD= 0.7024 0.7005 +0.27% -0.88% +0.7052 +0.6976 Dollar/Norway NOK= 8.0067 8.0496 -0.53% -2.44% +8.0583 +8.0038 Euro/Norway EURNOK= 9.4448 9.4575 -0.13% -4.10% +9.4606 +9.4250 Dollar/Sweden SEK= 8.6108 8.6427 +0.04% +4.99% +8.6588 +8.6018 Euro/Sweden EURSEK= 10.1570 10.1526 +0.04% +3.23% +10.1630 +10.1220 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ECB bond buys vs inflation http//reut.rs/2M7eKKVDXY and CFTC Positions http//reut.rs/2yam99i World FX rates in 2018 http://tmsnrt.rs/2egbfVh
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