September 26, 2018 / 8:37 PM / a month ago

FOREX-Dollar climbs after Fed lifts rates, flags more hikes

    * Fed raises rates, removes "accommodative" in statement
    * Dollar falls briefly, then rises again
    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh

 (New throughout, updates prices and market activity, adds more comments from Powell and analysts)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 26 (Reuters) - The dollar gained on Wednesday in choppy trading after the Federal
Reserve raised U.S. interest rates as expected for the eighth time, flagged more rate hikes and signaled
the end of the "accommodative" policy era.
    The greenback fell briefly against the euro and yen immediately after the Fed released its statement,
then resumed its climb as investors digested the statement.
    Fed policymakers boosted the benchmark overnight lending rate by a quarter of a percentage point to a
range of 2.00 percent to 2.25 percent. The central bank policy statement also omitted the word
"accomodative."
    The dollar's brief stumble showed that some investors believe the Fed's policy-setting Federal Open
Market Committee (FOMC) will start raising rates more gradually than in the past year. But its later gains
showed that investors also saw signals in the statement that rates will rise enough to further strengthen
the U.S. currency.
    The statement said the Fed still foresees another rate hike in December, three more next year, and one
increase in 2020. It also said it sees three more years of economic growth.
    "The removal of the term 'accommodative' does signal that the neutral rate is on the radar and the
FOMC will need to justify restrictive monetary policy in the coming year, a somewhat dovish development in
our view," said Marvin Loh, senior global market strategist, at BNY Mellon in Boston.
    Mark McCormick, head of North American FX strategy, at TD Securities in Toronto agreed, saying the
absence of "accommodative" in the statement was the reason for the initial fall in the dollar. 
    In his press briefing, Fed Chairman Jerome Powell clarified that the word "accommodative" was removed
as a sign monetary policy is proceeding in line with expectations.
    In afternoon trading, the dollar index, which measures the U.S. unit against six major
currencies, was up 0.2 percent at 94.287. Before the Fed decision, it had hit a one-week high of
94.40.
    Powell noted that the dollar has only partly recovered the decline it had in 2017. Some analysts said
this suggested that the Fed believes the currency's uptrend is still in place. 
    Against the yen, the dollar rose slightly at 112.67 yen.
    The euro briefly hit session highs versus the dollar after the Fed decision, before falling to $1.1747
, down 0.2 percent. Some market players believe the euro's outlook has brightened and investors are
positioning for a rebound.
    "The pieces are steadily falling into place for a more sustained rebound in the single European
currency, including more favorable capital flow dynamics and more balanced euro positioning," said Wells
Fargo in a research note.
    
    ========================================================
    Currency bid prices at 4:10PM (2010 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1737        $1.1771     -0.29%         -2.16%      +1.1797     +1.1727
 Dollar/Yen       JPY=        112.6800       112.9700    -0.26%         +0.01%      +113.1300   +112.6900
 Euro/Yen         EURJPY=     132.26         132.91      -0.49%         -2.15%      +133.0900   +132.2800
 Dollar/Swiss     CHF=        0.9656         0.9649      +0.07%         -0.89%      +0.9701     +0.9624
 Sterling/Dollar  GBP=        1.3162         1.3181      -0.14%         -2.59%      +1.3217     +1.3139
 Dollar/Canadian  CAD=        1.3017         1.2951      +0.51%         +3.50%      +1.3025     +1.2944
 Australian/Doll  AUD=        0.7258         0.7250      +0.11%         -6.97%      +0.7314     +0.7241
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1334         1.1352      -0.16%         -3.04%      +1.1385     +1.1333
 Euro/Sterling    EURGBP=     0.8917         0.8924      -0.08%         +0.38%      +0.8945     +0.8902
 NZ               NZD=        0.6650         0.6645      +0.08%         -6.15%      +0.6694     +0.6636
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.1117         8.1277      -0.20%         -1.16%      +8.1375     +8.0832
 Euro/Norway      EURNOK=     9.5230         9.5647      -0.44%         -3.31%      +9.5694     +9.5170
 Dollar/Sweden    SEK=        8.8095         8.8071      -0.22%         +7.41%      +8.8416     +8.7846
 Euro/Sweden      EURSEK=     10.3430        10.3660     -0.22%         +5.12%      +10.3826    +10.3420
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Cynthia Osterman and David Gregorio)
  
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