Dollar flat after Fed move, erasing steep losses
The U.S. dollar ended a volatile session little changed on Wednesday, recovering from early heavy losses after the Federal Reserve raised interest rates, as had been widely expected, and stuck to plans for one additional rate hike in 2017.
The dollar started the session higher but turned abruptly lower after a pair of data points came in below expectations. However, the Fed’s comments reversed that trade, helping it rebound almost completely off its lows.
The widely watched ICE U.S. Dollar Index DXY, -0.07% which tracks the buck against a basket of six rivals, was unchanged at 96.91. Earlier, the gauge dropped as much as 0.7%.
The WSJ Dollar Index BUXX, +0.00% a measure of the greenback against 16 major currencies, was off 0.2% at 88.11.
In addition to raising rates to between 1% and 1.25%, the U.S. central bank said that “this year” it would start to shrink its $4.5 trillion balance sheet.
Prior to the release of the Fed’s policy update, the consumer-price index fell by a seasonally adjusted 0.1% in May while the rate of inflation over the past 12 months slowed to 1.9% in May from a five-year high of 2.7% just four months ago. Separately, May retail sales fell 0.3%, their biggest drop in 16 months.