June 17, 2015 / 4:30 AM / 4 years ago

Dollar drops after Fed signals later move on rate hikes

NEW YORK (Reuters) - The dollar dropped on Wednesday after the Federal Reserve signaled that interest rate increases may start later than many have anticipated and trimmed its U.S. economic forecasts.

A U.S. one-hundred dollar bill (C) and Japanese 10,000 yen notes are spread in Tokyo, in this February 28, 2013 picture illustration. REUTERS/Shohei Miyano

The dollar was off more than 1 percent against the Swiss franc and sterling, while the euro climbed against the dollar, and was last up 0.75 percent.

The U.S. central bank, after the close of a two-day policy meeting, said the economy was likely strong enough to support an interest rate increase by the end of the year. But the Fed lowered its expectations for 2015 economic growth because of a weak start to the year.

Analysts are divided on whether the first Fed hike in about 10 years will occur in September or December.

“It wasn’t as hawkish as anticipated coming into the meeting,” said Steven Englander, global head of G10 FX strategy at Citi. “They were less committed (to starting rate hikes) than the market was looking for.”

A drop in U.S. Treasury yields, which followed a rise before the Fed statement was published, showed investors’ disappointment, Englander said.

“The dollar is weaker because the statement is largely dovish,” said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. “Yellen and the Fed in general are waiting for inflation to show its head, and they don’t believe it’s there yet.”

The euro, which has been weighed down by worries about Greece possibly defaulting on its debt, was last at $1.1327 EUR=, while the dollar index .DXY was down 0.75 percent.

The British pound GBP= touched its highest level against the dollar since November, and was up 1.20 percent to $1.5826. The pound was helped by data showing wages in Britain were growing faster than forecast.

The Swiss franc was last up 1.15 percent against the dollar, at 0.9215 franc.

Additional reporting by Sam Forgione in New York and Jemima Kelly in London,; Editing by Leslie Adler

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