Yesterday the Federal Reserve Bank of the United States held an important policy meeting which met the expectations of investors perfectly. Due to the recent upsets in fundamental reports from the States, analysts speculated that the Federal Reserve might be ready to change their approach from hawkish to dovish, without actually expecting an interest rate change this week.
This is exactly what happened yesterday. The Federal Reserve did not touch the interest rate, however, they spoke about the increasing need for one, based on the recent data. Previously investors thought that an interest rate decrease might not come until September, but now these expectations have been pushed forward as close as this upcoming month.
As a result of the dovish announcement, the dollar lost 0.5% of its value and the dollar index settled at 97.188. This also pushed the U.S. Treasury yields to their lowest level in over a year and allowed the Japanese yen to appreciate against the dollar. Note that the USD/JPY pair was difficult to predict earlier this week, as both currencies are popular safety assets. Nevertheless, the dollar’s loss is the yen’s gain.
