Dollar gains as Fed holds rates

Greenback stronger against major currencies as central bank indicates it is prepared to get credit flowing more freely.

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By Lara Moscrip, contributing writer

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NEW YORK ( -- The dollar rose against major currencies Wednesday after the Federal Reserve announced it would hold rates steady near 0%.

The dollar gained Wednesday against the 15-nation euro, starting the day at $1.3248 and dropping to $1.3231 immediately following the Fed's statement.

"The foreign exchange market reaction is largely dollar-driven and not risk appetite driven," said Ashraf Laidi, chief market strategist at CMC Markets in London.

Many investors view the dollar as a less risky alternative to assets like stocks and high-yield currencies, which are more volatile.

The Japanese yen weakened throughout Wednesday, starting at ¥89.64, to ¥90.06 after the Fed's announcement and worsening to ¥90.32 Wednesday afternoon.

The pound started Wednesday at $1.4261, increased to $1.4308 shortly after the Fed's announcement, and then fell against the dollar to $1.4193 late Wednesday.

The Federal Reserve kept its key interest rate in a range between 0% and 0.25%, and said it is ready to purchase longer-term Treasurys if it determines that such a move will help get credit flowing once again.

This may help lower the yield on government bonds and further lower the rates on various types of loans tied to Treasurys.

"Well aware of the risks of rising long-term treasury yields occurring despite ultra low short-term rates, the Fed has reiterated its readiness to contain such a risk by signalling the potential to buy long-term Treasurys (to drive down yields), which it sees no need to do at the moment due to the steepening of the yield curve (the difference between the yield on the 10-year and 2-year notes)," said Laidi.

The central bank also gave a bleak outlook for the U.S. economy, saying that while it expected a "gradual recovery" to begin later this year, significant risks remain. To top of page

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