Dollar slides in New York after Fed keeps rates steady

The dollar slumped on Thursday after the US Federal Reserve held interest rates steady amid a slew of global challenges and lowered its long-term outlook for the American economy. The US currency touched three-week lows versus the euro and two-week troughs against the Swiss franc, with the greenback's outlook darkening after revisions in the interest rate trajectory for the world's largest economy.
Fresh economic projections showed 13 of 17 Fed policymakers foresee raising rates at least once in 2015, down from 15 at the last meeting in June. Four policymakers now believe rates should not be raised until at least 2016, compared with two who felt that way in June. In keeping rates unchanged, the Fed said: "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."
The rate decision did not sit well with some market participants. Tom Porcelli, chief US economist at RBC Capital in New York, said the Fed will always face some hurdles to raising rates, but that failure to do so means it is letting other economies lead the way. "If you are incorporating global economic and financial market developments into your calculus then it will be very difficult for this Fed to get off of zero," he said. "The window is closing rapidly on them.
"We're not talking about a globe that is collapsing, some parts of the globe are slowing down. With a modest slowdown occurring, what the Fed is effectively doing is they are handing off the reins of monetary policy to the rest of the world," Porcelli said. In late trading, the euro rose to three-week highs of $1.1424 and was last at $1.1423, up 1.2 percent,
Against the yen, the dollar fell 0.5 percent to 119.92. The dollar dropped to two-week lows versus the Swiss franc, and it last traded at 0.9598, down 1.2 percent. Following the Fed decision, rates futures placed an 18 percent chance that the US central bank would end its near-zero interest rate policy in October, down from 41 percent Thursday morning, according to CME Group's FedWatch program. Rates futures indicated a 50 percent chance of a rate increase in December. Fed Chair Janet Yellen, in a post-decision press briefing, said every meeting would be a "live" one where the US central bank can make a decision to raise rates. She added that an October hike would be a possibility.