Dollar steadies after fall on Fed

The dollar steadied against the euro on Thursday after falling the previous day as a Federal Reserve statement prompted investors to trim expectations for an imminent interest rate rise to fight inflation.
Against the yen, the euro hit a record high after European Central Bank officials on Wednesday warned about persistently high inflation rates, reinforcing expectations the ECB will boost interest rates next month.
The US central bank on Wednesday left the benchmark fed funds rate at 2 percent, effectively ending one of its most aggressive rate cutting campaigns to limit the economic fallout from the housing and credit crisis.
The Fed voiced greater concerns about inflation in a statement following its two-day policy meeting but also said it expected price pressures to moderate this year, helping push back rate hike expectations.
"The dollar slid as the Fed gave no hint about when it was likely to lift rates," said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank. "The dollar is likely to stay on a downward trend against the euro for now," he said.
A Reuters survey, taken shortly after the Fed rate decision, showed all 16 primary dealers polled expect the central bank to stand pat at its next policy meeting in August.
Despite subdued expectations for a rate rise in the near term, the market still thinks the Fed's next rate move will be to hike rates as oil holds near record highs, causing energy prices to surge. According to US interest rate futures, the chance of the Fed raising rates to 2.25 percent in September is fully priced in the market.
The euro was little changed from late US trading on Wednesday at $1.5677. The pair has been trapped in a $1.5285-$1.5844 range for about two months. A break on either side of that range would determine the long-term direction for the pair, traders said.
Against the Japanese currency, the dollar was steady at 107.92 yen. Solid demand from Japanese importers who have missed chances to buy dollars during its rise versus the yen in the past few months, helped lift the dollar, traders said.