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* Fed downplays weak Q1 economic growth in policy statement
* Dollar hits more than six-week high vs yen
* Euro falls below $1.09 vs U.S. dollar
By Sam Forgione
NEW YORK, May 3 (Reuters) - The U.S. dollar rallied broadly on Wednesday and hit more than six-week highs against the yen after the Federal Reserve signaled it was still on track for two more interest rate hikes this year.
The Fed kept interest rates unchanged, downplayed weak first-quarter economic growth and emphasized the strength of the labor market in its statement following the end of a two-day policy meeting.
The central bank also said consumer spending continued to be solid, business investment had firmed and inflation has been "running close" to its target.
The dollar rose by as much as 0.7 percent against the yen, and hit 112.69 yen, the highest level since March 21, as the Fed statement solidified expectations for a rate hike in June and another in the second half of the year.
"The June hike looks pretty much alive," said Win Thin, global head of emerging markets currency strategy at Brown Brothers Harriman in New York.
The euro fell by as much as 0.4 percent against the dollar, to a session trough of $1.0888 after the statement, after rising as high as $1.0936 earlier. The dollar also jumped against the Swiss franc, sterling and the Canadian dollar.
Even before the Fed statement, the dollar had hit more than six-week highs against the yen as traders digested the possibility of ultra-long U.S. bond issuance and stronger-than-expected April U.S. services sector growth.
Investors were awaiting Friday's monthly U.S. non-farm payrolls report for greater signs of the Fed's likely rate hike trajectory through the end of the year. Economists polled by Reuters expect U.S. employers to have added 185,000 jobs in April, up from 98,000 in March.
The Fed statement "makes the Friday non-farm payrolls report I think more important, because if that is disappointing then the Fed is going to backpedal," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments.
Private employers expanded their payrolls by 177,000 jobs last month, payrolls process ADP reported on Wednesday. While that was the smallest gain since October, it roughly matched expectations of economists surveyed by Reuters, who had forecast a gain of 175,000 jobs.
The U.S. dollar index, which measures the greenback against six major currencies but the majority of whose weighting is against the euro, was last up 0.4 percent at 99.345. (Additional reporting by Jemima Kelly in London; Editing by David Gregorio and Leslie Adler)