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Dollar Dropping After Fed Hikes Interest Rates

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The dollar is falling against all of its major rivals Wednesday afternoon. As expected, the Federal Reserve raised its benchmark interest rate in response to the improving economy. The Fed has lifted its target rate by a quarter point to a range of 0.75% to 1%.

In addition to offering a modest rate hike today, the Fed said it still projects only two more rate hikes in 2017, three in 2018 and three in 2019. This is unchanged from the prior forecast in December.

Analysts thought the Fed might signal three more this year, but policymakers need details from the Trump administration about its tax reform and fiscal spending plans.

Also, the Fed is sticking to its 1.9% PCE inflation forecast for 2017.

Somewhat unexpectedly, the vote to raise rates was not unanimous. Neel Kashkari of the Minneapolis Fed dissented in favor of keeping rates on hold, but no reason was offered.

Retail sales in the U.S. saw a modest increase in the month of February, according to a report released by the Commerce Department on Wednesday, with the uptick in sales matching economist estimates. The Commerce Department said retail sales inched up by 0.1 percent in February after climbing by an upwardly revised 0.6 percent in January.

Economists had expected sales to creep up by 0.1 percent compared to the 0.4 percent increase originally reported for the previous month.

With a drop in gasoline prices partly offsetting increases in prices for food, shelter, and recreation, the Labor Department released a report on Wednesday showing a modest uptick in U.S. consumer prices in the month of February.

The Labor Department said its consumer price index inched up by 0.1 percent in February after climbing by 0.6 percent in January. The uptick in prices matched economist estimates.

Activity in the New York manufacturing sector grew at a modestly slower rate in the month of March, according to a report released by the Federal Reserve Bank of New York on Wednesday. The New York Fed said its business conditions index dipped to 16.4 in March from 18.7 in February, although a positive reading still indicates growth. Economists had expected the index to drop to 15.0.

Homebuilder confidence in the U.S. jumped to its highest level in almost twelve years in the month of March, according to a report released by the National Association of Home Builders on Wednesday. The report said the NAHB/Wells Fargo Housing Market Index surged up to 71 in March from 65 in February. Economists had expected the index to inch up to 66.

A report released by the Commerce Department on Wednesday showed that U.S. business inventories rose in line with economist estimates in the month of January. The Commerce Department said business inventories climbed by 0.3 percent in January following a 0.4 percent increase in December.

The dollar has dropped to a 2-day low of $1.0680 against the Euro this afternoon, from an early high of $1.0606.

France's inflation slowed slightly as estimated in February, the statistical office Insee showed Wednesday. Consumer price inflation eased to 1.2 percent in February from 1.3 percent in January. The annual rate came in line with expectations.

The buck has fallen to over a 1-week low of $1.2275 against the pound sterling this afternoon, from an early high of $1.2153.

The UK jobless rate declined to the lowest since 1975 at the start of the year as companies hired more staff amid robust economic activity.

The ILO unemployment rate was 4.7 percent in the three months to January versus 5.1 percent seen a year earlier and 4.8 percent in the fourth quarter of 2016, data from the Office for National Statistics showed Wednesday. The rate has not been lower since June to August 1975. The expected rate was 4.8 percent.

The greenback has tumbled to a 1-week low of Y113.855 this afternoon from an early high of Y114.883.

Japan's industrial production declined less than initially estimated in January, latest figures from the Ministry of Economy, Trade and Industry showed Wednesday.

Industrial production fell 0.4 percent month-over-month in January instead of a 0.8 percent drop estimated earlier. It was the first decline in six months.
In December, production had risen 0.7 percent.

by RTT Staff Writer

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