US dollar falls ahead of the Federal Reserve's rate decision

The dollar index fell 0.2% on Wednesday

The US dollar fell on Wednesday, while gold rose and Treasury yields held steady, ahead of the Federal Reserve's meeting, which analysts said would likely show policymakers remain committed to ultra-low interest rates. The dollar index, which tracks the strength of the dollar against a basket of major currencies, is down 0.3% at 92.83 as of 8:03 am. ET. The Federal Open Market Committee, which sets monetary policy, is widely expected to maintain a dovish stance on the outlook for the economy, meaning more weakness may lay in store for the dollar. "FOMC will be extremely dovish even if they upgrade their GDP forecasts," Jeffrey Halley, senior market analyst at OANDA, said. 

Low US interest rates make the dollar less attractive to overseas investors who may be able to pick up higher returns by holding other higher-yielding currencies. At the Fed's annual Jackson Hole symposium last month, the central bank unveiled a major change in policy, by saying it would now target an inflation rate that averages 2% over time, a decision investors have interpreted as its willingness to tolerate an increase in consumer prices. Previously, the Fed's target was that of maintaining inflation at 2%. 

US consumer inflation is currently running at 1.3%. Market watchers do not expect any rises in the Fed's benchmark interest rate, currently at 0.25%, for months to come, but are still waiting for the meeting to conclude to see if the central bank issues any surprise economic projections.




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