Dollar falls after Fed rate decision

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- The dollar fell against major currencies Wednesday after the Federal Reserve kept its interest rate policy unchanged.

What prices are doing: The dollar fell 0.3% against the euro to $1.2311, and slipped 0.8% to ¥89.84 against the Japanese yen.

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The pound extended gains, rising 1% versus the dollar to $1.4963 after the U.K. announced its most severe budget cut in decades on Wednesday.

What's moving the market: The Federal Reserve on Wednesday said it would keep its key interest rate target unchanged at between 0.0% and 0.25%.

The rate decision had little impact on currency prices, since interest rates were widely expected to be held near historical lows.

Still, investors will scrutinize the statement for any signs that the central bank plans to raise rates in the near future.

The decision comes on the heels of a new home sales from the Census Bureau that showed the sales fell further than expected to a record low.

Sales were expected to have fallen to a seasonally adjusted annual rate of 430,000 units in May from a 504,000 unit rate in the previous month, according to a consensus of economists surveyed by Briefing.com.

On Tuesday, a report from the National Association of Realtors showed that existing home sales missed expectations, falling 2% to a seasonally adjusted annual unit rate of 5.66 million in May from an upwardly revised rate of 5.79 million in April.

What analysts are saying: The dollar is likely to remain in a narrow range in the coming weeks unless U.S. economic data signals that the economy is improving, said Kevin Chau, a currency analyst at IDEAGlobal.

"In the long term though, it makes sense that the dollar will be stronger given that the problems in Europe are not going to go away," he said. "And if data in the U.S. continues to be weaker, people are going to have to revise their forecasts for U.S. growth and we'll see more of a safe haven flight into the dollar." To top of page

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