(Bloomberg) -- The Federal Reserve opened the door to an interest-rate increase as soon as June, while also indicating it will pursue a slower upward path once it achieves liftoff.

The new signals were contained in a policy statement that ended an era by dropping an assurance that the Fed will be “patient” in raising rates, and in a fresh set of estimates that lowered the median for the federal funds rate the end of 2015 to 0.625 percent compared with 1.125 percent in December.

“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Chair Janet Yellen said in a press conference Wednesday in Washington.

The Federal Open Market Committee said it will be appropriate to tighten “when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

David Fuller's view

The dropping of the word ‘patient’ in terms of raising rates was widely expected, so no surprise.  Moreover, the Fed’s sensible, measured statement was sufficiently reassuring to reverse an early decline and trigger a sharp rally by the S&P 500 Index.  The tech-heavy Nasdaq Composite is even stronger.  Additionally, the ‘canary in the coalmine’, known as the Russell 2000 Index of smaller companies is extending its upside breakout from a very long trading range. 

As interesting as this is, there is another even more potentially important development today. 

The US Dollar Index has seen its biggest downward dynamic by far since the 25% gain commenced in July 2014. I have mentioned in a number of Audios that the Fed must be concerned about the USD’s strength, which has certainly had a bigger impact than a couple of quarter-point rate hikes on the US economy.  Corporate profits for many US multinational shares have been well down, as global profits consolidated in USD have been pared. 

Has the Fed surreptitiously sold USD this week to weaken the currency?  That would have been a smart move, in my opinion, because a rate hike and an even stronger Dollar could have been too much for the slowly and erratically recovering US economy.  Moreover, this was not a buy-the-rumour, sell-the-news situation since the first rate hike is several months away. 

There is a possibility that roundophobia worried speculators as DXY reached 100, causing some of them to stop buying and take profits.  They may also have considered that the Fed would quietly intervene to check the Dollar’s upward momentum.  However, if the Fed did intervene, as I suspect, we are unlikely to hear about it but the greenback’s initial recovery will now move into a further reaction and lengthy multi-month consolidation.