DailyFX: Fed Dovishness Causes Dollar Weakness

The yen gained more than 100 points on the dollar in Asia trade on Wednesday, as a dovishFOMC statement triggered carry trade liquidation sales from spec and real moneyaccounts alike. On Tuesday in New York, the Federal Reserve Bank of New York  raised rates to 4.25% asexpected,  but in the accompanying statement,US monetary officials noted that further tightening is “likely to be needed”but is not assured leaving open the possibility that Fed may pause after onelast rate hike in January. With currency markets having priced in  4.5% US short term interest rates, many participants  chose to lock in profits on their long USD/JPYpositions which have proven to be extremely lucrative in the past three months.
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