The U.S. dollar extended losses against a basket of major currencies on Wednesday after the U.S. Federal Reserve left monetary policy unchanged and projected a less aggressive rise of interest rates in coming years.
The Fed strongly signaled it could still lift rates by the end of this year if the labor market improved further. The central bank noted U.S. economic activity had picked up and job gains were "solid" in recent months.
Fed policymakers, however, cut the number of rate increases they expect this year to one from two, and also projected a less aggressive rise in rates next year and in 2018, according to the median projection of forecasts released with the statement.
"The dot plot has moved quite sharply lower," said Alvise Marino, FX strategist at Credit Suisse in New York, in reference to the Fed's less aggressive rate rise projections. "That in itself is a pretty dovish development."
Losses were limited by the Fed statement suggesting it was still open to a December rate increase, noted Ian Gordon, FX strategist at Bank of America Merrill Lynch in New York.