FOREX-Dollar edges lower after Fed holds rates steady

The U.S. dollar edged lower against a basket of major currencies on Wednesday after the U.S. Federal Reserve held interest rates steady and signaled borrowing costs are likely to remain unchanged indefinitely. The Fed expects moderate economic growth and low unemployment to continue through next year's presidential election, the U.S. central bank's rate-setting committee said in its policy statement after the end of a two-day meeting on Wednesday.

The decision left the benchmark overnight lending rate in its current target range between 1.50% and 1.75%. "The bar to a rate hike remains higher than the bar to lowering rates further, but overall you are looking at a Fed that is fairly confident about where the economy is headed and expects inflation to remain under pressure for a prolonged period of time," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

The dollar index, which measures the greenback against six other major currencies, was 0.2% lower at 97.218. "Market participants are going to keep an eye out for the European Central Bank meeting tomorrow, but most will remain focused on what happens on Saturday with respect to U.S.-China trade negotiations," Schamotta said.

U.S. President Donald Trump has set Dec. 15 as the date to impose tariffs on nearly $160 billion in Chinese consumer goods, falling just days before Christmas in a move that could be unwelcome in both the United States and China. But it remains unclear if the Trump administration will go ahead with the tariffs. "If we do see a delay in tariffs, that clears the way for other currencies to rise relative to the dollar," Schamotta said.

The euro was 0.23% higher ahead of new ECB boss Christine Lagarde's first policy meeting on Thursday, where investors will scrutinize her every word for a sense of the direction the bank will take under her leadership. Elsewhere, Sweden's crown jumped to a more than four-month high against the dollar after strong inflation data made it highly likely the country would end negative interest rates. The dollar was 0.98% lower against the Swedish crown.

In another notable move, the Hong Kong dollar rallied to its strongest level since July 24, which analysts attributed to the unwinding of bets previously profiting from "carry trades" - borrowing with low-interest rates in Hong Kong to purchase U.S. dollar assets. The greenback was 0.22% lower against the Hong Kong dollar. Hong Kong's currency is pegged to the greenback at a tight range of 7.75-7.85 per dollar and the city's monetary policy moves lock-step with the United States.

The pound was 0.3% higher in very thin trading a day ahead of Britain's general election, shrugging off a key opinion poll that showed the ruling Conservative Party might still fail to win a majority.

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