WALL Street stocks rallied while the dollar pulled back against the yen as the Federal Reserve kept interest rates steady, opting against hiking for the second straight time.

The Fed’s decision means its benchmark lending rate will hold at a 22-year high of between 5.25% and 5.5%.

Since peaking at more than 7% in June 2022, inflation as measured by the Fed’s favoured yardstick has slowed by more than half – although it remains stuck firmly above three%.

While Fed chair Jerome Powell said there was still work to do to rein in inflation, markets appeared sceptical that the central bank will hike again.

“The Fed tried to deliver a hawkish hold but Wall Street is not believing additional tightening will happen this cycle,” said Oanda’s Edward Moya.

During a press conference, Powell acknowledged that financial conditions had tightened and described as balanced the benefits and costs of further tightening actions.

Analysts also pointed to US data that suggested economic softening, including weaker than expected manufacturing activity and lacklustre private-sector hiring.

All three major indexes advanced, with the broad-based S&P 500 winning just over 1%.

Earlier, European bourses had advanced, along with Japan’s Nikkei, which jumped more than 2% following the latest drop in the yen.

Bank of Japan officials on Tuesday had stopped short of fully tweaking its monetary policy, announcing only a minor change to its yield curve control programme. 

The news battered the yen, and yesterday it continued to fall, hitting 151.72 per dollar, its weakest level since touching a 32-year-low 151.95 in October last year and spurring an intervention.

The yen later recovered somewhat, advancing after a Japanese currency official suggested a possible intervention. 

The Japanese currency also gained ground against the dollar after the Fed decision. 

Key figures around 2100 GMT

New York - Dow: UP 0.7% at 33,274.58 (close)

New York - S&P 500: UP 1.1% at 4,237.86 (close)

New York - Nasdaq: UP 1.6% at 13,061.47 (close)

London - FTSE 100: UP 0.3% at 7,342.43 (close)

Frankfurt - DAX: UP 0.8% at 14,923.27 (close)

Paris - CAC 40: UP 0.7% at 6,932.63 (close)

EURO STOXX 50: UP 0.8% at 4,091.71 (close)

Tokyo - Nikkei 225: UP 2.4% at 31,601.65 (close)

Hong Kong - Hang Seng Index: DOWN 0.1% at 17,101.78 (close)

Shanghai - Composite: UP 0.1% at 3,023.08 (close)

Dollar/yen: DOWN at 150.89 yen from 151.68 yen on Tuesday

Euro/dollar: DOWN at US$1.0573 from US$1.0575

Pound/dollar: DOWN at US$1.2150 from US$1.2153 

Euro/pound: DOWN at 87.00 pence from 87.01 pence

Brent North Sea crude: DOWN 0.5% at US$86.63 per barrel

West Texas Intermediate: DOWN 0.7% at US$80.44 per barrel – AFP, November 2, 2023.