The Fed meeting outcome and its statement did not produce major surprises, but it managed to reinforce views that a rate hike is coming in December and this tempered equities. The Fed kept interest rates unchanged, as was widely expected. The central bank said in a statement, however, that it expects "further gradual increases" in the overnight rate. The Fed also did not mention the volatility that has hit the market recently. The Fed has hiked rates three times this year and is forecast to raise one more time before year-end.
Investor focus is now shifting back to the divergence between the monetary policies of the United States and other major economies, such as Japan where interest rates are seen staying extremely low. While the Fed is on track to raise interest rates, the BOJ is expected to keep its ultra loose monetary policy due to low growth and inflation. The widening interest rate differential between U.S. and Japanese bonds has made the dollar a more attractive bet than the yen, which is often a funding currency for carry trades.
CURRENCY NEWS: Japanese yen, widely viewed as a safe haven currency, was little stronger against greenback, as the U.S. Federal Reserve kept interest rates steady but reaffirmed its monetary tightening stance, setting the stage for a rate hike in December. The dollar was quoted at 113.97-98 yen compared with 114.01-11 yen in New York and 113.69-71 yen on Thursday in Tokyo. The euro, meanwhile, fetched 129.56-57 yen against 129.60-70 yen in New York and 130.01-05 yen in Thursday trade in Tokyo.
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