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The greenback plunged across the board on
Wednesday after the Fed downgraded its economic growth and
inflation projections, signalling it is in no rush to push
borrowing costs to more normal levels and pouring cold water on
investor expectations of a June rate hike.
Having dived to as low as 96.628 against a basket of major
currencies <.DXY> in the wake of the Fed, the dollar was trading
at 98.952 on Friday, down 0.1 percent on the day on track for
its first week of falls in five.
The euro was 0.2 percent higher against the dollar at $1.0683 <EUR=>,
well below Wednesday's high above $1.10 but still leaving the
single currency on track for its best weekly performance since
September 2013 with a 1.7 percent rise.
"The FOMC announcement was, on margin, more dovish than
expected. So the weakness that we saw in the dollar in the
aftermath of that translated into some rebounds in euro/dollar,"
said Phyllis Papadavid, senior global FX strategist at BNP
Paribas in London.
Papadavid said she expected the euro downtrend to resume, and
BNP Paribas yesterday revised down their euro forecasts to
parity with the dollar by the end of this year from $1.05
previously and to $0.95 by the second quarter of 2016.
But an overwhelming consensus among major banks that the euro
will continue to fall against the dollar found a doubter on
Thursday. In contrast to a slew of downward euro revisions,
British bank HSBC on Thurday revised up its forecast for the
single currency to $1.20 by 2017.
Against the yen, the dollar was 0.1 percent higher at 120.88 yen
<JPY=>, comfortably above its Wednesday post-Fed low of 119.29.
"Pressure will remain on the yen as before. Today, there is a
shortage of fresh trading incentives, so the yen has come back a
bit," said Ayako Sera, market strategist at Sumitomo Mitsui
Trust Bank in Tokyo.
The Bank of Japan stood pat on policy earlier this week, as it
has every month since expanding its massive stimulus programme
in October last year.
(Additional reporting by Lisa Twaronite in Tokyo; Editing by
Toby Chopra)
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