The Australian dollar has pulled back sharply in today’s trading after reaching a daily high of US78.45c yesterday as the US Federal reserve issued a cautious statement in their latest monetary policy meeting.
At 752am (GMT) the Aussie dollar was fetching US76.74c down from US77.40c in yesterdays close.
In her speech yesterday, Fed president Janet Yellen noted the central bank was still undecided on the timing of a rate hike and would like to see the employment market strengthen further, and inflation move closer towards their target rate of 2%
Investors fled the US dollar as the market had been expecting a more bullish tone from the Fed president in connection with a rise in interest rates.
Derek Holt, vice-president of Scotiabank Economics noted that the Fed is still concerned over a few matters, and especially inflation,
"Despite removing 'patient' from the statement which increases flexibility for timing liftoff as early as June, on balance the FOMC turned incrementally more dovish on the pace of projected interest rate increases over 2015-17 and backed this up with downward forecast revisions to growth and inflation,” he wrote in a note to investors.
As most analysts predicted, the Fed decided to remove the word”patient” from their latest statement although the move didn’t translate into an imminent rate hike,
“In other words, just because we’ve removed the word patient from the statement doesn’t mean we’re going to be impatient,” Fed chair Janet Yellen told a press conference.
“It does not mean an increase will necessarily occur in June, although we can’t rule that out,” she added. “It will depend on our assessment of realized and expected progress toward our objective of maximum employment and 2-per-cent inflation.” She said
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