published Sep 21st 2016, 7:04 pm, by Chikako Mogi

(Bloomberg) —
The dollar remains on course for its worst annual performance in four years after the Federal Reserve delayed raising interest rates again, saying more time was needed to assess U.S. economic conditions.

A broad gauge of the dollar against major currencies has fallen 4 percent this year, set for its first annual drop since 2012, despite lingering expectations for U.S. policy makers to raise interest rates by the end of the year. Fed Chair Janet Yellen, while agreeing that the case for a rate rise had strengthened, argued on Wednesday that it made sense to put off a move for now amid signs that discouraged Americans who dropped out of the labor market are returning and looking for work. The dollar fell along with Treasury yields after the central bank meeting.

“Markets see the Fed can’t hurry to raise rates, capping U.S. yields,” said Tohru Sasaki, head of Japan markets research at JPMorgan Chase in Tokyo. “With the U.S. presidential election coming up, the dollar’s upside is increasingly capped. These factors also point to more downside for the dollar against the yen.”

The Bloomberg Dollar Spot Index, which tracks the performance of a basket of 10 leading global currencies against the greenback, was down 0.1 percent as of 8:01 a.m. in Singapore, after sliding 0.7 percent on Wednesday. The yen was at 100.36 per dollar. It climbed 1.4 percent last session after initially falling as much as 1.1 percent following the Bank of Japan’s decision to adjust its stimulus efforts.

Japanese markets are closed Thursday for a national holiday.

BOJ Governor Haruhiko Kuroda and his board said Wednesday the central bank would move away from a rigid target for expanding the money supply, while seeking to control bond yields across different maturities. The central bank left the benchmark rate for a share of bank reserves unchanged at minus 0.1 percent, saying it may extend the negative rate if needed. It said it will aim to keep 10-year yields at about their current levels.

–With assistance from Narayanan Somasundaram. To contact the reporter on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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