Dollar falls against euro as Fed keeps rates at 1%

The dollar fell against the euro in New York yesterday after the Federal Reserve kept its target interest rate at a 45-year low and said it can be patient in keeping the rate slow to spur US job growth.

Fed policy-makers have kept the rate for overnight loans between banks at 1% since late June to spur business investment and prevent inflation from slowing to the point of outright deflation, or falling prices. Deflation keeps a lid on corporate profit margins and acts as a deterrent to hiring.

By contrast, the European Central Bank’s benchmark rate is 2% and the Bank of England’s is 4%. Higher rates make a nation’s financial assets more attractive to investors. The euro gained 20% against the dollar last year and the pound climbed 11%.