In reaction to an unchanged interest rate the Dollars fell sharply with the NZDUSD spiking to 0.7430 before the accompanying statement reversed the move. The caution in raising rates comes as inflation has consistently stayed below the Fed target of 2 percent. "Out of New Zealand events today it would appear the Colmar Brunton poll has the most market focus", said Westpac Bank strategist Imre Speizer.
After almost a decade of unprecedented efforts to pull the economy out of the 2008-2009 recession, the Fed's work is yielding results. It now holds approximately $4.2 trillion in Treasury bonds and mortgage-backed securities dating back to the 2007-09 financial crisis. The central bank also said it was still on track to raise interest rates later this year.
The currency traded in a range of $1.2236 to $1.2302.
At the end of its two-day meeting on Wednesday, the Federal Reserve is widely expected to announce it will begin to reduce its enormous bond portfolio, which reached $4.5 trillion. The impact of Hurricanes will also be a topic, and we expect the Fed to indicate that it will cause only short-term disruptions to the economy.
"Within a few months, rebuilding activity has typically kicked in, returning economic growth to normalor maybe even a little higher than normal", wrote Eric Winograd, AB senior economist in a note.
Stocks had been mostly flat ahead of the Fed statement, while the dollar had been slightly lower. Brent crude, used to price global oils, gained 55 cents to $55.69 per barrel in London. "I will not say that the committee clearly understands what the causes are".
Meanwhile, the Bank of Japan will be on the radar as the central bank begins a two-day meeting.
ANALYST'S TAKE: "The Fed's view will likely play the key role in driving price action". The persistently low inflation suggests the economy is not at full employment, despite a historically low unemployment rate of 4.4%. Many banks, large and small, have projected their profits will increase as rates continue to rise and they are able to earn more from the difference on the rate they charge borrowers compared to what they're paying out. "Whether the Fed hikes in December will remain an open question until December".
The Fed did stick to its earlier projection of one more rate hike this year, which most analysts have been projecting in December.
They forecast USA economic growth of 2.4% in 2017, a 0.2% increase from the previous projection of 2.2% in June.
Her term expires early next year, and it's unclear if President Donald Trump will reappoint her to the job.