South Africa's rand weakened against the dollar in early trade on Thursday as the greenback rallied on the back of the hawkish U.S. Federal Reserve statement, pushing emerging market currencies lower.
The Federal Reserve has left interest rates unchanged while signaling that it expects a resilient USA economy and solid job market to justify further rate hikes later this year.
The Fed was not expected to raise interest rates at this meeting, which is usually a boon for gold.
They also said inflation is running close to their goal of 2 percent.
While there is ongoing debate that President Trump's tax and infrastructure proposals could force the Fed to raise rates faster, it's unlikely any of those policies will have a real impact on the economy this year.
The Fed is in its first tightening cycle in more than a decade after it spent years keeping rates near zero to nurse the economy back to health following the 2007-2009 recession.
"This glass-half-full statement leaves the door wide open to a June hike, provided, of course, that the recent data letdowns are indeed transitory", Michael Feroli, chief United States economist at JPMorgan Chase & Co, wrote in a note to clients.
"The committee views the slowing in growth during the first quarter as likely to be transitory", the Fed said in a unanimous statement.
RBNZ Keeps Rates at Record Low, Sees Weaker Inflation Ahead
Overall, policymakers believed that headline inflation would reach the midpoint of the target band over the medium term. This is encouraging and, if sustained, will help to rebalance the growth outlook towards the tradables sector.
While the market expects the Federal Reserve to keep interest rates unchanged, investors will be keen to analyze the central bank reaction to the recent patch in the economy.
Investors who bet on the future path of the fed-funds rate project the next rate hike raised the odds of a move in June from 70% to 90%, Bostojancic said.
"We maintain our call for rate hikes in June and September", Barclays said.
The Federal fund interest rate peaked in the early 1980s at almost 20%.
Going into Wednesday's meeting the markets were putting the chances of another quarter-point rate rise in the June 13th-14th meeting at more than 66 per cent, according to an analysis of futures trading from CME Group.
Since the Great Recession, weak first quarters have been the norm, with the economy gaining strength later on, noted Greg McBride, chief financial analyst for Bankrate.com.
Still, a change in the Fed's statement regarding its reinvestment policy would be somewhat unexpected on Wednesday, because the March minutes indicated that "the committee would continue its deliberations on reinvestment policy during upcoming meetings".
The latest statement offered no more leads on when the Fed might announce when and it will begin shrinking its $US4.5 trillion balance sheet.
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