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Dollar Little Changed As Investors Digest Fed Decision

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The dollar is turning in a mixed performance against its major rivals Thursday afternoon, but is little changed overall. Investors remain focused on yesterday's announcement from the Federal Reserve, despite the release of a trio of economic reports this morning.

While the Fed raised interest rates by a quarter point yesterday, they delivered a sober assessment of the economy and subdued inflation outlook. Instead of foreshadowing three more interest rate hikes in 2017, the Fed still sees only two modest rate hikes by year's end.

First-time claims for U.S. unemployment benefits saw a modest decrease in the week ended March 11th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims edged down to 241,000, a decrease of 2,000 from the previous week's unrevised level of 243,000. Economists had expected jobless claims to dip to 240,000.

While the Commerce Department released a report on Thursday showing a rebound in new U.S. residential construction in the month of February, the report also showed a sharp pullback in building permits.

The report said housing starts jumped by 3.0 percent to an annual rate of 1.288 million in February after slumping by 1.9 percent to a revised 1.251 million in January. Economists had expected housing starts to climb to a rate of 1.260 million from the 1.246 million originally reported for the previous month.

Meanwhile, the report said building permits tumbled by 6.2 percent to an annual rate of 1.213 million in February after surging up by 5.3 percent to a revised 1.293 million in January. Building permits, an indicator of future housing demand, had been expected to drop to a rate of 1.260 million from the 1.285 million originally reported for the previous month.

Philadelphia-area manufacturing activity grew at a slower rate in the month of March, the Federal Reserve Bank of Philadelphia revealed in a report on Thursday. The Philly Fed said its diffusion index for general activity fell to 32.8 in March from 43.3 in February, although a positive reading still indicates growth. The index had been expected to drop to 30.0.

The dollar has rebounded to around $1.0715 against the Euro Thursday afternoon, from an early low of $1.0746.

Eurozone inflation accelerated, as estimated, at the fastest pace in more than four years in February, final data from Eurostat showed Thursday. Headline inflation accelerated to 2 percent in February from 1.8 percent in January. The rate came in line with the flash estimate published on March 2. Inflation exceeded the central bank target.

Policymakers of the Bank of England decided to maintain its record low interest rate, in a split vote, as one policymaker preferred a quarter point hike.

The Monetary Policy Committee of the BoE, governed by Mark Carney, on Thursday, voted 8-1 to hold the key bank rate at 0.25 percent. Kristin Forbes voted to lift the bank rate by 25 basis points.

The other eight members of the committee thought that the current stance of monetary policy remained appropriate to balance the demands of the Committee's remit.

The buck has dropped to a 2-week low of $1.2350 against the pound sterling this afternoon, from an early high of $1.2234.

The Bank of Japan decided to leave its monetary stimulus unchanged on Thursday after the U.S. Federal Reserve resorted to another rate hike.

Governor Haruhiko Kuroda and his board members decided by a 7-2 vote to maintain the central bank's target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.

The BoJ board also voted to retain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.

The central bank will purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

The greenback slipped to a low of Y112.902 against the Japanese Yen Thursday, but has since bounced back to around Y113.290.

by RTT Staff Writer

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