The dollar rose against the euro and yen on Wednesday after the Federal Reserve gave no indication it was ready to change current measures to revive borrowing and stimulate the economy. The Fed's statement at the end of its two-day policy meeting came after traders reported the Swiss National Bank was intervening in the market by selling the Swiss franc for dollars and euros.
The dollar was the biggest beneficiary of the intervention reports; the Swiss National Bank declined to comment. The Fed left the benchmark fed funds rate, which is the US interbank lending rate, at virtually zero, as it focuses on driving down other borrowing costs by buying mortgage-related debt and US government bonds. The Fed repeated it will evaluate the timing and size of purchases of securities in light of the evolving outlook.
"So the statement is imperceptibly more hawkish, but overall confirms that the Fed is in no hurry at all to launch an exit strategy, and I would expect markets to push further back expectations of rate hikes, as we have already seen in the past days," said Marco Annunziata, London-based chief economist of UniCredit Group, in a note to clients.
"We are set for a prolonged wait-and-see period, with the Fed on hold and the markets nervously watching," said Annunziata, who is the global head of economics, fixed income & FX research at UniCredit Group. The euro last traded at $1.3936, down 1 percent for the day, according to Reuters data. Against the yen, the dollar was up 0.4 percent at 95.55 yen on electronic trading platform EBS.
Traders said the Swiss central bank or the Bank of International Settlements or both intervened at least twice on Wednesday, actions that drove both the Swiss franc and the euro lower. Both banks declined to comment. The dollar rose as high as 1.1026 francs on electronic trading platform EBS, breaking the 1.1000 level for the first time since May 21. It last traded up 2.9 percent at 1.0980. It was the biggest one-day move since September 30, 2008, at current prices.
The euro was up 1.8 percent at 1.5298 francs on EBS. It climbed as high as 1.5381. It was the biggest one-day move for the euro against the Swiss franc since March 12, at current prices. "It seems there was a second round from the SNB or BIS, though they probably won't confirm that," said Michael Woolfolk, senior currency strategist at Bank of New York-Mellon. "But it seems pretty clear from the muddy footprints in the market and the price action that they were intervening, not only in euro/swiss but also in dollar/swiss."
US data released on Wednesday painted a mixed picture of the economy. New orders for durable goods, which are long-lasting manufactured goods such as refrigerators and washing machines, unexpectedly jumped 1.8 percent in May, providing further evidence that the battered US economy was getting its footing. The euro had earlier come under pressure after the ECB allotted a higher-than-expected 442 billion euros ($613 billion) in funds at a flat rate of 1 percent.