Dollar drops as Fed repeats vow to support economy
The dollar fell on Wednesday after the Federal Reserve left interest rates unchanged and repeated a vow to do what it takes to shore up the economy that has been battered by business shutdowns due to the novel coronavirus.
"The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals," the central bank said in a statement at the end of a two-day policy meeting.
The dollar index against a basket of currencies fell 0.32% to 99.544, but held above a two-week low of 99.44 reached on Tuesday.
"They're certainly not wanting to upset the apple cart. They went out of their way to say they're going to continue to do what they're doing," said Marvin Loh, senior global macro strategist at State Street Global Markets.
The dollar has weakened more than 3% after scaling a more than three-year peak of 102.99 in late March as global central banks launched massive stimulus measures to protect economies from the coronavirus pandemic.
The Fed's statement came after data earlier on Wednesday showed that the U.S. economy contracted in the first quarter.
The Commerce Department said gross domestic product fell at a 4.8% annualized rate in the January-to-March period after expanding at a 2.1% rate in the final three months of 2019.
The dollar reaction to the data was not "huge," but "I think it's going to pour cold water over hopes of a V-shape recovery. And I think it also validates fears that second-quarter growth could be in line with some of the more dire forecasts of a 40% contraction," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The greenback also weakened on improving risk sentiment after Gilead Sciences said its experimental antiviral drug remdesivir helped improve symptoms in COVID-19 patients who were given the drug early.
That added to optimism that businesses across the globe are closer to reopening.
"We're seeing increasing chatter about economies opening up around the world, so that would suggest that the global economic reboots could happen sooner rather than later," Manimbo said.
The Australian dollar, which is seen as a proxy for global growth, jumped 0.83% to $0.6544. It earlier reached $0.6551, the highest since March 10.
The euro gained 0.51% to $1.0873 before a European Central Bank meeting on Thursday.