Not surprisingly, the Fed continued to ignore the value of the dollar, and it fell in the wake of the FOMC announcement today. The Fed did acknowledge that the economy is picking up, however. But despite all the encouraging signs out there, they will continue with their plan to buy over a trillion dollars of mortgage-backed securities, albeit at a somewhat slower pace.
So the market continues to bid up stocks, since the outlook is less grim than previously thought, and continues to bid up Treasuries, since the Fed has given no indication that it will raise short-term interest rates anytime soon. The Fed's promise to keep rates low for a long time, coupled with the steepness of the yield curve, is a powerful incentive for the market to buy 10-year Treasuries, even if easy money and a weaker dollar continue to fuel inflation pressures.