Dollar plunges against main and emerging rivals after Fed decision.
The U.S. dollar on Wednesday spiraled lower against its major and emerging-market rivals after the Federal Reserve cut its outlook for the number of interest-rate hikes in 2016.
Currency analysts cast the Fed's decision to downgrade its outlook for rate increases this year as a major setback for those betting on a steady advance for the buck.
The revised outlook may force currency strategists to revise bullish end-of-year forecasts, especially for the euro-dollar and dollar-yen. pairs higher.
Read: Fed leaves interest rates unchanged, sees only two hikes in 2016
"It's certainly less likely that we'll hit parity [with the euro] this year," said Omer Esiner, chief market analyst at Commonwealth foreign exchange, referring to a number of Wall Street forecasts that the greenback would soon trade on par with the euro.
The ICE U.S. Dollar index DXY, -1.01% a measure of the buck's strength against a basket of six rival currencies, was up 0.4% at 97.01.
The revised outlook brings the Fed's outlook into alignment with what Wall Street is pricing in.
"Now, we can say that market and the Fed are on the same page," said Naeem Aslam, chief market analyst at AvaTrade.
A spate of encouraging economic data had strengthened the case for raising interest rates, until the Fed's decision Wednesday. Data suggest U.S. inflation has begun to rise toward the Fed's target of just under 2% annually, considered a healthy level. Before the Fed statement, the dollar had strengthened before turning sharply lower after.
The statement's direct reference to global-market risks added to the central bank's dovish tone, analysts said.
"The really striking thing in the statement for me is that the Fed still continues to worry as much as it does on the global economic headwinds," Esiner said.
Earlier in the session, the dollar strengthened after strong readings on the U.S. housing market,consumer-price inflation and industrial production.
The dollar weakened to ¥112.57 USDJPY, -1.03% compared with ¥113.02 late Tuesday in New York. The euro strengthened to EURUSD, +0.8107% $1.1217, compared with $1.1107 Tuesday. The pound GBPUSD, +1.4728% surged to $1.4248, compared with $1.4155 Tuesday.
Among emerging market currencies, the South African rand USDZAR, -1.9695% Russian ruble USDRUB, -1.4350% and Mexican peso USDMXN, -0.9092% were among the best performers against the dollar.
Read: U.S. dollar poised to gain 10% or better, even if Fed holds on rates
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