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Forex - Dollar near 1-month lows after Fed, Dutch election lifts euro

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Investing.com - The dollar struggled near one-month lows against the other major currencies on Thursday after the Federal Reserve sounded more cautious about the future pace of rate hikes, while the euro hit five-week highs on relief over Dutch election results.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was at 100.44 at 08.21 GMT, after touching overnight lows of 100.25, the weakest since February 9.

The Fed raised interest rates to 1% on Wednesday; the second hike in three months and stuck to its outlook for two more rate hikes this year and three in 2018.

The drop in the dollar came after the Fed did not flag any plan to speed up the pace of monetary tightening, with Fed Chair Janet Yellen reiterating that the pace of rate hikes would be gradual.

The dollar was lower against the yen, with USD/JPY at 113.32 after falling to one-month lows of 112.91 overnight.

The Bank of Japan kept monetary policy on hold on Thursday, in a widely anticipated decision, underlining the diverging monetary policy paths of major central banks.

The euro touched five-week highs as Dutch election results boosted hopes that a mainstream candidate will win the upcoming French presidential elections after Prime Minister Mark Rutte's party comfortably beat the anti-Islam Freedom party.

EUR/USD hit highs of 1.0746, the strongest level since February 7 before easing back to 1.0716.

Sterling was lower against the dollar, with GBP/USD slipping 0.17% to 1.2269 ahead of the Bank of England's monetary policy decision later in the day.

The BoE was not expected to make any changes but the meeting minutes will be scrutinized for any indications that it is considering tightening policy in the face of rising inflation.

Meanwhile, the Swiss franc was steady against the dollar, with USD/CHF at 1.0001 after the Swiss National Bank kept its Libor rate on hold at a record low of -0.75%. The pair ended the previous session down almost 1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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