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The dollar dipped to another yearly low versus the euro after the Federal Reserve said that the US economy was in recovery after a severe downturn. However, the central back cautioned about the jobs situation and signaled it would leave interest rates exceptionally low for an extended time.
On top of that, the Fed said it would slow purchases of mortgage debt to extend that program's life through next March.
The central bank said it would buy a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt, a move meant to create liquidity so mortgage lending and the housing markets can stabilize and so overall conditions in private credit markets can improve.
On inflation, the Fed stated that a weak economy would help keep inflation under control "for some time."
Immediate after the statement accompanying the Fed's decision to hold its key interest rate near zero, the dollar hit a new yearly low of 1.4843 versus the euro.
From there, however, the buck quickly improved to 1.4800 as gave the Fed statement deeper consideration.
The dollar also stabilized following some initial weakness versus the yen and sterling.
The buck held near 1.6400 versus the pound, even as the Fed's comments spurred increased risk appetite. Concerns about the health of the UK economy have kept the dollar afloat versus the pound.
Versus the yen, the dollar slipped to 90.85 before finding its footing. With the loss, the dollar gave back early gains and moved back toward a 7-month low of 90.11.
In news from the housing front, mortgage application volume increased in the week ending September 18, as falling interest rates spurred refinancing.
The Mortgage Bankers Association's market composite index, which measures mortgage loan application volume, rose 12.8 percent on a seasonally adjusted basis.
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