The US dollar fell against major currencies on Wednesday as the Federal Reserve signaled that it would keep interest rates near zero for the foreseeable future, citing concerns about the pace of the economic recovery and ongoing risks from the COVID-19 pandemic.
The US central bank's Federal Open Market Committee (FOMC) kept its benchmark interest rate unchanged at a range of 0.00%-0.25%, as expected, but made some changes to its statement that suggested a more cautious approach to monetary policy.
The FOMC statement said that the economy had "made progress" toward the Fed's goals of maximum employment and stable inflation, but that "the path of the economy continues to depend on the course of the virus."
The Fed also said that it would continue its monthly purchases of $120 billion in Treasury securities and mortgage-backed securities "until substantial further progress has been made" toward its goals.
The US dollar fell sharply against major currencies following the announcement, with the euro rising 0.7% to $1.182 and the British pound gaining 0.8% to $1.390. The Japanese yen also strengthened, rising 0.6% to 109.65 per dollar.
The US dollar index, which measures the currency against a basket of six major rivals, fell 0.5% to 92.41, its lowest level since early July.
The Fed's decision and accompanying statement were seen as dovish by many analysts, with some predicting that the central bank could maintain its accommodative monetary policy for the rest of the year.
"The Fed is in no hurry to withdraw accommodation," said Scott Minerd, global chief investment officer at Guggenheim Investments. "They're basically saying that we're going to be in this easy monetary policy mode for a while."
The FOMC's next meeting is scheduled for September 21-22, where it is expected to provide further updates on its monetary policy outlook. Forex traders and investors will be closely watching for any indications of a shift in the Fed's stance, as well as any developments on the ongoing risks from the pandemic.