NEW YORK (Reuters):
THE DOLLAR fell broadly yesterday, hitting a six-week low against the yen, as traders unwound bets that the Federal Reserve could get more aggressive in raising interest rates this year.
The U.S. currency hit its lowest levels since March 17 at 104.50 yen , down half a per cent from late Tuesday on mounting speculation that China would soon revalue the yuan.
Chart levels and short-term interest rate levels also dominated the market's attention and dragged the dollar lower.
"The market had expected a more hawkish statement and so the slight dovish slant has lead to a further unwind of dollar longs," said Aziz McMahon, currency strategist with ABN AMRO in New York, in a note to clients.
The U.S. central bank on Tuesday raised its key interest rate to 3.0 per cent, the eighth quarter-point rise since last June.
AGGRESSIVE RATE HIKES
But hopes from dollar bulls that the Fed was hinting at more aggressive rate hikes down the road were dampened after the Fed issued a revised statement reinstating a phrase that said the long-term inflation expectations remain contained.
"The dollar is generally weak in response to the changed statement from the Fed. There's speculation that the Fed may pause in raising rates earlier than expected if economic growth continues to the weak side," said Michael Klawitter, senior currency strategist at West LB in Duesseldorf.
