NEW YORK (AFP) — The dollar fell against other world currencies Wednesday after the US central bank decided to leave its key base interest rate unchanged at 2.0 percent.
The Federal Reserve's decision, following a two day meeting, had been widely anticipated. Economists say the Fed was boxed into a corner as it could not raise rates because of slower growth, while a cut in rates may only have stoked mounting inflation pressures.
Traders bid down the dollar's worth in the wake of the Fed's announcement. The US unit has fallen dramatically against other currencies in the past year as the US economy has slowed amid a housing slump, a credit crunch and slower job growth.
The European single currency rose to 1.5667 dollars around 2100 GMT, up from 1.5565 dollars in New York late Tuesday.
Against the Japanese currency, the dollar was swapping hands at 107.82 yen, down slightly from 107.83 yen a day earlier.
The Federal Open Market Committee's (FOMC) policymakers, led by chairman Ben Bernanke, voted 9-1 to keep rates steady, but analysts said the Fed's accompanying statement suggested the central bank could be leaning slightly toward a hike in rates further down the road.
The action marked the first pause by the US central bank since it began a series of aggressive rate cuts last September in the federal funds rate.
The panel echoed comments from Bernanke that the world's biggest economy remains weak but that the risk of a calamitous meltdown had eased.
"Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased," the FOMC statement said.
The dollar also slipped amid downbeat economic news.
The Commerce Department reported that new home sales fell 2.5 percent in May to an annual rate of 512,000 units. Most economists had expected sales to fall more sharply to around 510,000 new properties amid one of the deepest and longest-running US housing slumps in decades.
A separate government report showed that new durable goods orders failed to grow during the same month.
"Today's figures show that activity remains soft in both the manufacturing and housing sectors. The only good news is that if the economy is indeed in a recession, it hasn't yet developed into a severe downturn," said Paul Ashworth at Capital Economics.
The euro meanwhile drew support from a strong rise in eurozone industrial orders, which jumped 2.5 percent in April from March, much better than the 0.5 percent expected by economists.
"The data is likely to reinforce the ECB's (European Central Bank) belief that the eurozone's economy is fundamentally sound and that it can press ahead with raising its key interest rate from 4.00 to 4.25 percent at its July 3 meeting to try to ensure that current elevated inflationary levels and pressures are not sustained over the medium term," said Howard Archer of Global Insight.
Higher interest rates in Europe, compared to the United States, have also weighed down the dollar as investors have sought higher yields in the eurozone.
In Britain the pound came off early highs after a Bank of England rate-setter expressed concern about the economy.
Outgoing policy maker John Gieve said that what started as a marked turndown in commercial property was now spreading to the housing market and that he expected "a downturn in economic activity over the rest of the year."
His comments took the shine off a rise in the pound, boosted earlier in the day by an upbeat retail sales survey from the Confederation of British Industry.
In late New York trade Wednesday, the dollar fell to 1.0350 Swiss francs from 1.0414 late Tuesday.
The pound was quoted at 1.9748 dollars, up from 1.9704.
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