The dollar dropped against a basket of major currencies on the back of the Federal Reserve's Wednesday policy statement, hitting a nearly one-month low due to a slightly more dovish outlook than expected.
The central bank chose to keep policy as is, leaving the federal funds rate target at rock-bottom levels, and noting in identical language to its April statement that "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."
But the Fed also made changes to its projections about both the federal funds rate and GDP, showing that it is now expecting both slower growth and lower policy rates in the near future. To some, this points to a good deal more downside for the greenback.
Jens Nordvig, Nomura's global head of fixed income, recommends exiting long-dollar positions on the back of the Fed news.
Nordvig had previously suggested being long the dollar against the yen, and being long the euro against the dollar (which is equivalent to being long the dollar against the yen).
Referring to the euro trade in a Wednesday afternoon note, Nordvig wrote that "This trade was partly based on the prospect for a 'status quo' view from the Fed, which is not exactly what we have been getting today," due to the GDP and future fed funds rate (or "dot plot") projections.