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Dollar Slips After Fed Policy Announcement

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The U.S. dollar has softened against most major currencies Wednesday afternoon after the Federal Reserve left interest rates unchanged as widely expected, and said it would be 'patient' with regard to future rate increases.

After holding firm against major currencies earlier in the day thanks to a report from payroll processor ADP that private sector showed a bigger than expected increase in private sector jobs growth in January, the dollar climbed down a bit sharply, reacting to the dovish tone of the central bank.

The Fed said it has decided to maintain the target range for the federal funds rate at 2.25 to 2.50%. The accompanying statement included some notable changes from last month, including dropping a reference to the Fed's plan for further gradual rate increases.

The central bank also removed a sentence describing the risks to the economic outlook as "roughly balanced." It said it still sees a sustained expansion of economic activity, strong labor market conditions, and inflation near its symmetric 2% objective as the most likely outcomes but also pointed to global economic and financial developments and muted inflation pressures.

The Fed subsequently said it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support those outcomes. In his press conference, Fed Chairman Jerome Powell said the "case for raising rates has weakened somewhat."

Powell said interest rates are in the range of what the central bank views as a neutral level that is neither restrictive nor stimulative.

"I would need to see a need for further rate increases," Powell said, indicating that signs of rising inflation would be key.

The dollar index, which moved closer to 96.00 earlier in the day, dropped to 94.94 after the Fed announced its policy. It is currently hovering around 95.10, down by about 0.45%.

Against the yen, the dollar dropped to 108.90, losing nearly 0.5%.

Against the Swiss franc, the greenback was down marginally.

The euro is trading at $1.1484, rallying from $1.1407. The euro rose to a high of $1.1503.

Against the pound sterling, the dollar weakened to 1.3110, easing from 1.3067.

The report from payroll processor ADP showed the pace of job growth slowed in January but still far exceeded analyst estimates.

ADP said private sector employment jumped by 213,000 jobs in January after soaring by a downwardly revised 263,000 jobs in December.

Economists had expected employment to increase by about 178,000 jobs compared to the spike of 271,000 jobs originally reported for the previous month.

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