TOKYO: The dollar struggled against its peers on Thursday after the Federal Reserve indicated it was more likely to raise interest rate three times in 2018 instead of the four that some currency bulls had hoped for.
The Fed raised rates by 25 basis points to 1.75 percent on Wednesday and signalled two more hikes for 2018, highlighting its growing confidence that tax cuts and government spending will boost the economy and inflation and spur more aggressive future tightening.
The U.S. central bank also projected three hikes in 2019.The greenback slipped, however, with investors who had bet on the Fed signalling four rate increases in 2018 instead of the widely anticipated three seen to have taken profits after the announcement.
The dollar index against a basket of six major currencies was 0.3 percent lower at 89.528, after dropping as much as 0.7 percent overnight.
“The Fed hiking rates three times, and even four times, this year won´t be too big of a surprise for the currency market, which fully expects the Fed to continue normalising policy,” said Shin Kadota, senior strategist at Barclays in Tokyo.
“On the other hand, there is still room for the market to price in other central banks normalising policy.
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