Currency speculators have seemed convinced or the last few months that at some point, the Fed is sure to hike interest rates once it is obvious the economy is in good shape. Based on yesterday’s Central Bank rate decision and subsequent announcement, it appears that ‘obvious’ is far from the thinking of the Board members.

It was not unexpected that at the conclusion of its rate policy meeting Tuesday (March 16) the Fed would hold to a zero interest rate policy. Of more interest to economists, analysts, and investors was the commentary on the current state of the economy and potential direction of rates.

The loud and clear message delivered Tuesday afternoon was that rates are not going higher anytime soon. As speculation has diminished of a sooner than later rate increase, the dollar’s momentum to finish 2009 and start 2010 has waned a bit. The Euro passed through the $1.38 level early in the week’s currency trade for the first time since mid-February. After a dip down, one Euro currently fetches $1.3752.

Part of the recent increase in Euro strength against the dollar can also be attributed to recent commentary from the European Union putting pressure on the US government to closely monitor credit swaps that adversely impact the Euro-dollar value.

The British Pound has seen a similarly strong near-term spike against the greenback, though the Pound saw its near-term low a bit more recently at the start of March when it touched just below $1.50. The Pound currently trades at $1.5299 after reaching as high as $1.5383 in overnight European currency trade.

As is the name of the speculation game, current sentiment only lasts until it changes. If a number of data reports begin to clearly show that the economy is on solid ground, it would not take long for the Central Bank leaders to spring into action on rate hikes. Higher yields naturally lead to a more valued currency.

However, it seems at the moment that the Fed is more concerned with preserving momentum, if you call it that, in housing, credit, and other markets. With other housing and loan programs near expiration, the Fed wants to ensure borrowers find incentivizing loan rates and businesses are more motivated to expand. Unemployment seems to be nearing its bottom based on recent jobless claims and unemployment data. Thus, a low interest policy could remain in effect for months.