Investing.com - The U.S dollar fell after the Federal Reserve left rates unchanged and signalled rates could be close to neutral after downgrading its outlook on future rate hikes.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.66% to 95.20.
The Federal Reserve flagged slowing global and domestic growth as it left its benchmark rate in a range of 2.25% to 2.5%. The central bank signaled that it would continue to keep rate hikes off the table for remainder of the year.
"In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes," the Fed said in a statement.
In a further sign that the wobbles in the economy has spooked the Fed somewhat, the central bank said it will begin in May to reduce the amount of proceeds it allows to roll off each month and will end the program in September.
The Fed has been allowing as much as $50 billion a month of maturing securities to roll off its balance sheet, which peaked at roughly $4.5 trillion in Jan. 2015. It has now narrowed to about $4 trillion.
The dollar was also supported by a plunge in sterling amid fears the U.K. could crash out EU without a deal on March 29 after The EU reportedly said it would only agree to a short delay to Brexit if U.K. lawmakers back Prime Minister Theresa May's withdrawal agreement next week.
GBP/USD slid 0.75% to $1.3168 and EUR/USD rose 0.09% to $1.1335.
USD/JPY rose 0.09% to Y111.47 as the plunge in U.S. government bond yields in the wake of the Fed's statement pressured the greenback.
USD/CAD rose 0.03% to C$1.3325 but upside in the pair was limited by strength in the loonie on rising U.S. oil prices amid data showing crude inventories fell much more than expected.