FOREX-Dollar pares gains after Fed statement shows steady dovish tilt
* Fed statement less hawkish than expected
* U.S. second-quarter GDP data beats expectations
* U.S. ADP jobs report weaker-than-expected
* Optimism remains for strong U.S. non-farm payrolls (Updates prices, adds comments)
By Sam Forgione
NEW YORK, July 30 (Reuters) - The U.S. dollar pared gains against a basket of major currencies on Wednesday after a Federal Reserve statement disappointed expectations that the central bank would take a more hawkish bias on monetary policy.
The Fed, in a statement following its latest two-day policy meeting, noted a decline in the jobless rate and signaled more comfort that inflation was moving up toward its 2 percent target. But it still reiterated concerns about slack in the labor market and reaffirmed that it is in no rush to raise interest rates.
As expected, the central bank cut its monthly bond-buying program by $10 billion.
"The Fed statement was not as hawkish as it could have been," said Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis. Traders are watching the Fed closely for signs of when it will raise rates, which could boost the dollar by driving capital flows into the United States.
The statement came after the Commerce Department said U.S. GDP expanded at a 4.0 percent annual rate after shrinking at a revised 2.1 percent pace in the first quarter. Economists polled by Reuters had forecast a 3.0 percent growth rate in the second quarter after a previously reported 2.9 percent contraction.
Analysts said the data increased the potential for a more hawkish tilt from the Fed at its next policy meeting in September. The U.S. dollar index, which measures the dollar against a basket of six major currencies, hit a 10-1/2 month high of 81.545 after the release of the GDP data.
The GDP figures overshadowed data from the ADP National Employment Report showing U.S. companies hired 218,000 workers in July, below economists' expectations for a gain of 230,000 jobs, according to a Reuters poll. [ID:nL2N0Q50TD
The ADP data was "still consistent with a strong pace of monthly job creation" and didn't dampen optimism surrounding Friday's U.S. non-farm payrolls report, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. Economists expect U.S. employers to have added 233,000 jobs in July, according to a Reuters poll.
The dollar index was last up 0.25 percent at 81.419. The euro was last down 0.12 percent against the dollar at $1.3393, recovering a bit from a fresh eight-month low of $1.3368 hit earlier in the session. The dollar was last up 0.75 percent against the yen at 102.86 after hitting a three-month high of 103.08.
The dollar was up 0.2 percent against the Swiss franc at 0.9087 franc after hitting a six-month high of 0.9106 franc. U.S. government bond yields rose, with the benchmark 10-year note yield at 2.56 percent, from 2.46 percent late Tuesday.
(Reporting by Sam Forgione; Editing by Tom Brown and Cynthia Osterman)