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FOREX-Dollar sags after Fed stands pat, signals less aggressive rate rises

Published 22/09/2016, 10:37 am
© Reuters.  FOREX-Dollar sags after Fed stands pat, signals less aggressive rate rises
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* Dollar nurses losses after Fed keeps interest rates unchanged

* Fed signals less aggressive rate rises in coming years

* Dollar/yen hits lowest level in nearly 4 weeks

* RBNZ keeps rates steady, retains easing bias

By Masayuki Kitano

SINGAPORE, Sept 22 (Reuters) - The dollar hit a near 4-week low against the yen on Thursday after the U.S. Federal Reserve kept monetary policy steady and projected a less aggressive path for interest rates hikes in coming years.

The Fed strongly signalled that it could raise interest rates this year if the labour market improved further. The U.S. central bank noted U.S. economic activity had picked up and job gains were "solid" in recent months. policymakers, however, cut the number of rate increases they expect this year to one from two, and also projected a less aggressive rise in interest rates next year and in 2018, according to the median projection of forecasts released with its post-meeting statement on Wednesday.

The dollar fell 0.2 percent to 100.15 yen JPY= and touched a low of 100.12 yen at one point, its lowest level since Aug. 26. On Wednesday, the dollar had slid nearly 1.4 percent against the yen.

The dollar had already been on the defensive against the yen before the Fed's policy statement, as the yen pushed higher after the Bank of Japan overhauled its policy focus.

The BOJ made an abrupt shift on Wednesday to targetting yields on government bonds to achieve its elusive inflation target, after years of massive money printing failed to jolt the economy out of decades-long stagnation. took a sceptical view of the BOJ's ability to generate inflation through the new measures, which drove the yen higher against the dollar.

The yen could see further gains against the dollar, especially if there are any episodes of investor risk aversion going forward, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"The dollar will probably trade at around 99 yen to 102 yen, but if any risk-off moves were to occur, a new range of 95 yen to 100 yen could come into view," he said.

The dollar index, which measures the greenback's value against a basket of six major currencies, touched a low of 95.398 .DXY =USD at one point on Thursday, its lowest level since Sept. 16.

The euro edged up 0.1 percent to $1.1195 EUR= , having pulled up from Wednesday's trough of $1.1123.

The New Zealand dollar slipped briefly after the Reserve Bank of New Zealand (RBNZ) left the door wide open for another interest rate cut this year.

The RBNZ kept its benchmark interest rate unchanged at 2.0 percent on Thursday but reiterated that further easing will be required. New Zealand dollar slipped to as low as $0.7316 NZD=D3 earlier on Thursday, but later regained its footing and was last trading at $0.7362 NZD=D3 , up 0.2 percent from late U.S. trade on Wednesday.

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