NEW YORK (AFP) — The dollar slipped against the euro Wednesday after the US Federal Reserve delivered on a widely expected interest rate cut but sent mixed signals on its outlook for the world's biggest economy.
At 2100 GMT, the euro was at 1.5623 dollars, up from 1.5572 late Tuesday.
The dollar was firm against the Japanese currency, trading at 103.87 yen, up from 103.98.
Analysts said traders had already taken account the Fed's quarter-point reduction, taking the federal funds rate to 2.0 percent, the lowest level since November 2004.
The Fed has slashed the benchmark rate by 3.25 percentage points since September in a bid to stimulate sluggish growth amid a prolonged housing slump and credit squeeze.
"The economy and continuing credit crunch may well be calling for the Fed to lower rates, but the fact that it will pressure the dollar further, creates problems of its own -- specifically those related to rising commodity prices," PNC Bank analysts wrote in a client note.
The Federal Open Market Committee (FOMC) said in its statement that financial markets remain under stress and that there is considerable uncertainty about the inflation outlook.
Forex Capital Markets analyst Terri Belkas said there was "little doubt" that rocketing commodity prices were creating substantial upside inflation risks.
But the recent uptick in core consumer price index, which excludes volatile food and energy prices -- "was enough to make the FOMC's inflation hawks uncomfortable," Belkas said.
Earlier the dollar had gotten a lift from the US government's initial estimate of first-quarter economic growth, showing a sluggish but a slightly better-than-expected 0.6 percent pace after the same rate in the 2007 fourth quarter.
Michael Woolfolk of the Bank of New York Mellon noted that the growth data also revealed a deceleration in a key gauge of inflation.
The core Personal Consumption Expenditure index -- one of the Fed's favored measures of inflation -- fell to an annualized 2.2 percent from a downwardly revised 2.5 percent in the last three months of 2007.
"The combination of stronger-than-expected growth and lower-than-expected inflation should argue for the Fed remaining on hold through the summer, with further policy moves date-dependent," said Woolfolk.
In late New York trade, the dollar was at 1.0345 Swiss francs, down from 1.0373.
The pound was at 1.9868 dollars, up from 1.9694.
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