(Updates prices, adds comments, details)
* Fed hikes rates, as expected, but maintains 2017 rate
* Fed statement seen less hawkish
* Medium- to long-term dollar outlook still seen positive
By Gertrude Chavez-Dreyfuss
NEW YORK, March 15 The dollar posted steep
losses against major currencies on Wednesday after the Federal
Reserve raised interest rates as expected but signaled a more
gradual pace of monetary tightening this year than many in the
The greenback fell to a five-week low against the euro, a
four-week trough versus the Swiss franc and a two-week low
against the yen and sterling.
The Fed on Wednesday lifted the target overnight interest
rate by 25 basis points to a range of 0.75 percent to 1.00
But further rate increases would only be "gradual," the Fed
said in its policy statement, with officials sticking to their
outlook for two more rate hikes this year and three more in
2018. The Fed lifted rates once in 2016.
Prior to the Fed's decision, investors had been pricing in
at least four rate hikes this year.
"In largely sticking with its previous median interest rate
projections, the Federal Reserve expressed a lack of conviction
in the economic relief rally that has lifted global financial
markets to historic levels," said Karl Schamotta, director of
global product and market strategy at Cambridge Global Payments
"After a massive buildup in long positions earlier this
week, currencies are in full reversal mode, with the dollar
The dollar index fell to two-week lows and was last at
100.780, down 0.9 percent.
The euro rose to five-week highs against the dollar and last
changed hands at $1.0696, up 0.9 percent.
Against the yen, the dollar fell to two-week lows and last
traded at 113.43 yen, down more than 1 percent on the
The greenback also fell to its lowest level in four weeks
against the Swiss franc, and it weakest in two weeks
Yet despite the dollar's sharp losses on Wednesday, Bill
Northey, chief investment officer at the private client group of
U.S. Bank in Helena, Montana, said the currency's weakness is
only short-term in nature.
"We continue to believe that there is strong underpinning
for U.S. dollar strength in the more intermediate term," Northey
"That's based on the rate differential path to monetary
policy among major central banks around the world. And that's
not likely to change."
Fed funds futures have priced in a nearly 50 percent chance
of another rate increase in June and an almost 60 percent
probability of one at the July meeting, according to the CME's
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chris Reese
and Meredith Mazzilli)