* Fed says to keep rates low through all of 2023
* Eurodollar futures pare back bets on rate hikes in 2022, 2023
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (New throughout, adds Fed statement, new comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, March 17 (Reuters) - The U.S. dollar fell on Wednesday, after the Federal Reserve said it does not expect to raise interest rates through all of 2023, contrary to market expectations.
The dollar index dropped 0.5% to 91.44 =USD after the Fed comments.
The greenback had reversed its slide in recent sessions on a surge in U.S. Treasury yields due in part to growing expectations that the Fed may tighten rates earlier than thought on forecasts of a faster-than-expected economic recovery.
In a statement after the Fed held interest rates steady, the U.S. central bank said it expects a rapid jump in U.S. economic growth and inflation this year as the COVID-19 crisis winds down, and vowed to keep its target interest rate near zero for years to come. was in contrast to what the eurodollar futures market suggested before the Fed statement, almost fully pricing in a rate hike by December 2022 and three increases in 2023. the improvement in the Fed's economic outlook did not immediately change policymakers' expectations for interest rates, the weight of opinion did shift. Seven of 18 officials now expect to raise rates in 2023, compared to five in December.
"The Fed has materially upgraded its assessment of the U.S. economy's potential over the next several years, rather than merely reshuffling improvements from one year to another," said Matt Weller, global head of market research, at Gain Capital
"Though policymakers did start to price in earlier interest rate hikes, the shift was less hawkish than many traders had feared," he added.
After the Fed statement, eurodollar futures pared back bets on an interest rate hike by December 2022. It has priced in so far a 90% chance of tightening by March 2023 and just two hikes for the whole of that year. EDc1
The euro rose 0.7% against the dollar to $1.1978 EUR=EBS .
Against the yen, the dollar fell 0.2% to 108.84 yen JPY=EBS .
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Currency bid prices at 3:10PM (1910 GMT) Description
RIC
Last
U.S. Close Pct Change
YTD Pct
High Bid
Low Bid
Previous
Change
Session
Dollar index
=USD
91.4530
91.8730
-0.45%
1.636%
+92.0060
+91.3870 Euro/Dollar
EUR=EBS
$1.1972
$1.1903
+0.60%
-2.00%
+$1.1985
+$1.1887 Dollar/Yen
JPY=D3
108.8400
109.0200
-0.18%
+5.35%
+109.3200 +108.7900 Euro/Yen
EURJPY=
130.30
129.75
+0.42%
+2.66%
+130.4300 +129.7200 Dollar/Swiss
0.9222
0.9248
-0.30%
+4.22%
+0.9296
+0.9218 Sterling/Dollar GBP=D3
$1.3942
$1.3895
+0.36%
+2.07%
+$1.3949
+$1.3853 Dollar/Canadian CAD=D3
1.2420
1.2448
-0.25%
-2.49%
+1.2493
+1.2411 Aussie/Dollar
AUD=D3
$0.7793
$0.7746
+0.68%
+1.37%
+$0.7800
+$0.7700 Euro/Swiss
EURCHF=
1.1041
1.1007
+0.31%
+2.17%
+1.1061
+1.1006 Euro/Sterling
EURGBP=
0.8585
0.8567
+0.21%
-3.94%
+0.8604
+0.8541 NZ
NZD=D3
$0.7235
$0.7190
+0.68%
+0.81%
+$0.7245
+$0.7155 Dollar/Dollar
Dollar/Norway
NOK=D3
8.4180
8.4700
-0.65%
-2.00%
+8.5145
+8.4050 Euro/Norway
EURNOK=
10.0811
10.0967
-0.15%
-3.69%
+10.1351
+10.0735 Dollar/Sweden
8.4537
8.4960
+0.15%
+3.14%
+8.5298
+8.4476 Euro/Sweden
EURSEK=
10.1210
10.1058
+0.15%
+0.44%
+10.1465
+10.1140
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates
https://tmsnrt.rs/2RBWI5E
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