Investing.com - Investing.com - The dollar shot up against most major currencies on Wednesday after the Federal Reserve said it was closing its monthly bond-buying program and stressed it noticed improvements taking place in the labor market.
In U.S. trading on Wednesday, EUR/USD was down 0.71% at 1.2645.
Six years of ultra-loose monetary policy are coming to a close.
The Federal Reserve said earlier it was leaving its benchmark interest rate unchanged at 0.00-0.25% and said it was closing its monthly bond-buying program in a move widely expected by markets.
Prior to Wednesday, the Fed had been purchasing $15 billion in Treasury and mortgage debt a month to spur recovery by suppressing interest rates, though improvements taking place in the labor market prompted the U.S. central bank to end the stimulus program.
The program began in 2012 at $85 billion a month, while a gradual tapering brought it down to October's closure.
"The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability," the Fed said in its statement on monetary policy.
"Accordingly, the Committee decided to conclude its asset purchase program this month."
Despite hit-or-miss economic indicators, the U.S. economy continues to recover.
While inflationary pressures remain at bay, consumer prices should soon approach the Fed's 2% comfort zone.
Still, the Fed won't rush to hike interest rates until monetary authorities are convinced the economy is firmly standing on its own two feet, though the Fed will act if it sees inflationary pressures mounting.
"The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the statement read.
"However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated."
In the past, the Fed has hinted that rates may begin to rise when the unemployment rate reached 6.5%.
Today, an improving labor market has brought that rate down to 5.9%, though slackness still persists in the labor market in the form of many working part-time jobs and others remaining out of the workforce for too long.
Other fears persist that cooling European and Chinese economies may drag on U.S. recovery, and the Fed stressed in its statement that it will analyze a broad spectrum of data and not just a few indicators when deciding to raise interest rates, often referred to as removing policy accommodation.
"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent," the Fed said.
"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
Still, the dollar firmed on the overall upbeat take on the U.S. economy, as expectations for the Fed to take some time between closing its stimulus program and raising interest rates have already been priced into trading.
The dollar was up against the yen, with USD/JPY up 0.70% at 108.91, and up against the Swiss franc, with USD/CHF up 0.80% at 0.9548.
The greenback was down against the pound, with GBP/USD down 0.73% at 1.6013.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.41% at 1.1214, AUD/USD down 0.74% at 0.8790 and NZD/USD down 1.14% at 0.7826.
The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.75% at 86.11.
On Thursday, the U.S. is to publish revised data on third-quarter GDP, as well as the weekly report on initial jobless claims. Later in the day, Fed Chair Janet Yellen is to speak at an event in Washington; her comments will be closely watched.
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