* U.S. Fed nods to firmer inflation, still focused on labor
* Dollar broadly holds gains, hits session high against yen
* Gold declines on strong U.S. economic data
(Updates with U.S. market close)
By Angela Moon
NEW YORK, July 30 The dollar held gains against
a basket of major currencies while U.S. Treasuries yields surged
on Wednesday after the Federal Reserve raised its assessment of
the U.S. economy while reiterating it is in no hurry to increase
The Fed took note of a decline in the jobless rate and
signaled more comfort that inflation was moving up toward its
"We only expected marginal changes, and for the most part we
got that - with the caveat that they were a bit more hawkish
than was widely expected," said Tom Porcelli, chief U.S.
economist at RBC capital markets in New York. "They basically
diminished this whole notion of disinflation in their comment."
Wall Street's S&P 500 ended nearly flat while the U.S.
dollar held gains, hitting session highs against the yen
As widely expected, the central bank also cut its monthly
asset purchases to $25 billion from $35 billion, leaving it on
course to shutter the program this fall.
The statement came after data showed second-quarter gross
domestic product expanded at a 4.0 percent annual rate as
activity picked up broadly after shrinking at a revised 2.1
percent pace in the first quarter.
"We will be expecting more of a hawkish stance in
September," said Aaron Kohli, an interest rate strategist at BNP
Paribas in New York. "These kinds of numbers should encourage
the Fed to be much more assertive."
U.S. Treasuries yields surged, with two-year note yields
at 0.563 percent, the highest since May 2011.
Five-year note yields were up 8.5 basis points, the
biggest one-day rise in over four months.
The U.S. dollar index, which measures the dollar
against a basket of major currencies, was last up 0.2 percent at
81.406, just under a 10-1/2-month high of 81.545 touched earlier
in the session.
The Dow Jones industrial average fell 31.75 points,
or 0.19 percent, to 16,880.36, the S&P 500 gained 0.12
point, or 0.01 percent, to 1,970.07 and the Nasdaq Composite
added 20.20 points, or 0.45 percent, to 4,462.90.
MSCI's All-World Index was down 0.2 percent
and European shares fell 0.5 percent, held back by
cement makers. Switzerland's Holcim and Germany's
HeidelbergCement reported disappointing results,
blaming weak emerging-market currencies.
Spot gold was at $1,296.16, slightly below its
previous close of $1,298.10. Prices were under pressure
throughout much of the session after quarterly U.S. economic
growth accelerated more than expected.
Brent crude fell $1.21 to settle at $106.57 a
barrel, while U.S. crude slipped 70 cents to settle at
$100.27 a barrel after hitting a low of $99.90.
(Reporting by Angela Moon; Editing by Nick Zieminski and Dan