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Euro-dollar parity may be more elusive after Fed

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The Fed tripped up the dollar's rally and may have pushed the greenback into a short-term correction with its forecasts for a slower pace of interest rate hikes, strategists say.

The dollar index slumped as much as 3 percent in the worst selloff in six years, after a dovish U.S. central bank on Wednesday pared back its own forecasts for interest rate hikes, cut its outlook for inflation and warned the economy has been moderating. The euro hit a high of about $1.10 to the dollar, in Wednesday afternoon trading, from a low point of $1.05.

As the dollar fell, stocks rallied and bond yields declined. The strengthening greenback has been a key factor in markets, sending ripples through U.S. equities, as traders worry about its impact on the profits of multinationals. The strong dollar has also fanned fears about deflation, as it pounded commodities markets, like oil and gold and weighed on emerging markets.