Herbert Lash, David Henry

NEW YORK (Reuters] – On Wednesday, the dollar lost ground after the U.S. Federal Reserve shifted from a hawkish monetary policies to a more cautious one. However, it did not give a surprise which might have increased its week-long momentum.

As traders analysed Fed statements after a two-day meeting, the, which gained 3% from the Russia-Ukraine conflict on February 24, and 10% since May respectively, dropped to 0.6% Wednesday.

Erik Bregar from Silver Gold Bull Inc said, “There were not additional hawkish surprise,” adding that the Fed was consistent with what traders expected. He said that some of the hawkish bets were being recast.

The value of the dollar dropped to the British Pound and the euro, which were both higher earlier in the day due to hope for an agreement in Russia/Ukraine peace talks.

Both the euro and pound gained 0.7% with the euro trading at $1.1032.

Fed increased interest rates by an expected quarter of percentage point. It projected that its policy rate would range from 1.75%-2% at the end of the year to 2.8% next.

Strategists Wells Fargo Securities called Fed’s comments “very hawkish”, in a note to clients. It also said that the Fed should continue its support for the dollar.

Surprisingly, the dollar index fell. This could indicate that Fed rhetoric wasn’t more hawkish.

The Fed did project the equivalent of quarter-percentage-point rate increases at each of its six remaining policy meetings this year but that was in line with market expectations for rates.

The yield curve flattening was seen when yields for 10-year U.S. Treasuries rose to 2.2%, and that of two-year Treasuries rose to 1%.

On Thursday, the Bank of England will meet and market participants expect that it will raise rates another quarter of a percent.

Expect the Bank of Japan to announce that it will not alter its ultra-loose policy setting on Friday.

The dollar gained 0.4% against the Japanese yen. It reached 119.13yen during the day, its highest level in over five years.

The Australian dollar, which is commodity sensitive, increased 1.3% to $0.7288.

Last up 5% to $41,186

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Prices for currency bids at 4:40PM (2040 GMT).

Description U.S. Close RIC Pct Change Pct High Low Bid

Before Change

Session

Dollar index

98.3840 98.9280 -0.54% 2.844% +99.0820 +98.2910

Euro/Dollar

$1.1032 $1.0955 +0.71% -2.95% +$1.1047 +$1.0948

Dollar/Yen

118.7150 118.2900 +0.36% +3.13% +119.1150 +118.1700

Euro/Yen

130.97 129.57 +1.08% +0.50% +131.0500 +129.5400

Dollar/Swiss

0.9405 0.9414 -0.12% +3.08% +0.9460 +0.9391

Sterling/Dollar

$1.3142 $1.3045 +0.75% -2.82% +$1.3156 +$1.3036

Dollar/Canadian

1.2688 1.2766 -0.59% +0.38% +1.2777 +1.2681

Aussie/Dollar

$0.7288 $0.7198 +1.27% +0.28% +$0.7297 +$0.7181

Euro/Swiss

1.0376 1.0309 +0.65% +0.07% +1.0385 +1.0305

Euro/Sterling

0.8394 0.8398 -0.05% -0.07% +0.8429 +0.8384

NZ

Dollar/Dollar $0.6838 $0.6770 +1.06% -0.04% +$0.6844 +$0.6743

Dollar/Norway

8.8920 9.0145 -1.38% +0.92% +9.0090 +8.8720

Euro/Norway

9.8111 9.8725 -0.62% -2.02% +9.8809 +9.7780

Dollar/Sweden

9.4100 9.6043 -1.36% +4.35% +9.6338 +9.3999

Euro/Sweden

10.3822 10.5256 -1.36% +1.45% +10.5464 +10.3819