"It was noted as well that the longer-run normal level to which the nominal fed funds rate might be expected to converge…would likely be lower than in previous decades reflecting a slower rate of potential growth. The comments regarding gradual tightening while not entirely new have weighed on the U.S. dollar," said currency analyst at Bank of Tokyo-Mitsubishi, Lee Hardman.
But longer term, dollar strength -- and even parity against the euro -- is still to be expected -- even though it will be at a slower pace than perhaps originally thought.
"Monetary policy divergence is likely to result in continued dollar appreciation. Widening interest rate differentials lie at the heart of our forecast of further dollar appreciation, especially via the euro and the yen," said chief economist at Goldman Sachs, Jan Hatzius in a note published Thursday.
As well as the timing and pace of rates in the U.S., the European Central Bank have also signaled they are willing to expand its quantitative easing program in December and possibly cut the deposit rate, which should also prove supportive for the dollar longer term.
"Even if the Fed did nothing , the European Central Bank is potentially cutting interest rates next month," said Foley who expects to see euro dollar at $1.05 on a one to three month view, while parity "might be a little bit more of a slow grind".