Dollar steadies as Fed hold leaves rate path unclear
The United States dollar steadied on Thursday after the Federal Reserve held interest rates as expected, while leaving investors uncertain about the rates outlook. The Fed delayed any change to borrowing costs until after next week's midterm elections in a 10-2 decision, and upgraded its assessment of an economy it now says is growing at a "strong pace". The dollar had held near two-week highs before the announcement, but turned lower after Fed Chair Kevin Warsh's press conference offered no clear steer on a December move.
Traders read the silence as dovish
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said Warsh's silence on further rate rises was interpreted as dovish, or not hawkish enough, because some market participants had expected him to pair the on-hold decision with guidance on December. Traders were pricing in a 78% chance of a rise in December, according to the FedWatch tool, while the dollar index against six major currencies stood at 102.26 in early Asian hours. The euro eased 0.15% to $1.1134 after firming 0.3% in the previous session, while the dollar was up 0.14% against the Japanese yen at 158.045 yen.
Shares stay cautious as oil stays high
Equity markets reflected the same caution. Indian shares were expected to open little changed on Thursday, with GIFT Nifty futures at 22,708, indicating a muted start for the Nifty 50. Brent crude futures hovered around $115 per barrel as traders weighed Middle East conflict risks to regional energy supplies, and Indian benchmarks had dropped in six of the last seven sessions as elevated oil prices raised concerns over inflation, interest rates and the rupee. The meeting therefore gave markets and the Fed time to assess upcoming jobs and inflation data, but it settled very little.
