*
Dollar moved higher after Fed held rate steady
*
Fed sees two cuts this year, but inflation to slow future ones
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Concern about Middle East conflict continues
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Iran leader rejects U.S. demand for surrender
(Updates prices, analyst comments)
By Laura Matthews
NEW YORK, June 18 (Reuters) - The U.S. dollar traded higher
against most major currencies on Wednesday, but remained weaker
against the yen after the Federal Reserve kept interest rates
unchanged as economic uncertainty and tariffs continue to paint a
murky outlook.
Policymakers still forecast slashing rates by half a percentage
point this year, but have slowed the pace of future cuts, concerned
that President Donald Trump's tariffs would stoke inflation.
"The speculation continues to be up in the air. Q2 numbers are
going to be key to really coming to the realization that we are under
actual recessionary pressures that will force the Fed to really
rethink what they're doing," said Juan Perez, director of trading, at
Monex USA.
"They are receiving mixed signals, so they're sending back mixed
signals."
With the Fed's decision now behind it, markets remain focused on
the fighting between Israel and Iran, which has spurred investors to
scoop up safe havens.
Israel has bombarded arch-enemy Iran over the past six days to
halt its nuclear activity and has asserted the need for a change of
government in the Islamic Republic.
The U.S. military is also bolstering its presence in the region,
Reuters reported, stirring speculation about U.S. intervention that
investors fear could widen the conflict in an area with critical
energy resources, supply chains and infrastructure.
Iranian Supreme Leader Ayatollah Ali Khamenei has rejected Trump's
demand for unconditional surrender on Wednesday, and the U.S.
president said his patience had run out, but gave no clues on his next
step.
The dollar has resumed its role as a safe haven, having gained
around 1% against both the Japanese yen and Swiss franc since last
Thursday. On Wednesday, the U.S. currency took a breather, edging
fractionally lower against the yen and the franc and more noticeably
so against the euro and the pound.
Against a basket of six other major currencies, the dollar is
still down around 8% so far this year as confidence in the U.S.
economy and the reliability of Trump's administration as a trading and
diplomatic partner have faded.
U.S. markets are closed on Thursday for the Juneteenth federal
holiday.
Against the yen, the dollar pared losses and was last
seen down 0.06% to 145.18 and was 0.36% higher against the franc
at 0.8190 francs.
NO CHANGE FROM THE FED
Traders were expecting the U.S. central bank to leave borrowing
costs unchanged and were looking to parse what Chair Jerome Powell
says about the outlook for growth and inflation.
Uncertainty was already running high and recent data have begun to
show the impact of Trump's erratic approach to trade and tariffs. The
escalation of conflict in the Middle East, and the surge in crude oil
prices to about $75 a barrel, have further complicated the picture for
policymakers.
"Although not outright mentioned, inflationary concerns of tariffs
and an oil shock coming from the Middle East are also reasons that
they are not cutting interest rates," said Phil Blancato, chief market
strategist at Osaic.
Still, Blancato believes the Fed is "missing the mark by not
getting the process of cutting rates."
The dollar kept to weaker ranges earlier in the day after data
showed the number of Americans filing new applications for
unemployment benefits fell, but stayed elevated.
Meanwhile, the Swedish central bank cut rates as anticipated,
leaving the crown weaker against the euro, which rose 1%
to 11.0770 crowns.
On Thursday, the Swiss National Bank, the Bank of England and the
Norges Bank will deliver their respective rate decisions.
The pound fell 0.12% to $1.3411, after having received an
early boost from data showing inflation cooled no more than expected
to an annual rate of 3.4% in May, ahead of the BoE decision. The euro
slipped 0.03% to $1.1476.
In the background, an area of frustration for investors was a
Group of Seven meeting in Canada that yielded little on the tariff
front ahead of Trump's early-July deadline for additional import
levies.
Currency
bid
prices at
18 June?
08:44
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 6
Euro/Doll 461
Dollar/Ye 7
Euro/Yen 33
Dollar/Sw 55
Sterling/ 401?
Dollar/Ca 35
Aussie/Do 47
Euro/Swis 72
Euro/Ster 42
NZ 12
llar
Dollar/No 36
Euro/Norw 04
Dollar/Sw 91
Euro/Swed 55
(Reporting by Laura Matthews in New York; additional reporting by
Johann M Cherian in Bengaluru; editing by Christopher Cushing, Jamie
Freed, Joe Bavier and Mark Heinrich)
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