Although going into the meeting, the U.S. economy and its labor market appeared stable and ready to absorb higher rates; the central bank pressed that turbulent markets outside of the United States hovered on the Federal Reserve’s interest rate policy.

While refraining from hiking its bench mark interest rate wasn’t much of a surprise since traders had pegged the odds of it happening at 50/50, the language of the Federal Open Market Committee suggested that members were even more cautious than economists had thought.

The Fed decision played havoc with the markets this morning, as investors struggled to interpret the move.

Fed chair Janet Yellen cited worries about the slowdown in China as the reason why there wasn’t a rate rise this week but added that the USA economy continues to grow moderately and there will be an increase before the end of the year.

“The Fed outcome has provided risk-on sentiment for local equities and the rupee”, said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd. “It clearly shows that the Fed is also watching other markets before taking a decision on its policy”.

Some said there were indications that the yen may have suffered from a high demand for dollars in Japan compared to elsewhere, reflected in prices of cross currency basis swaps.

Economists had forecast growth of 0.6 per cent.

Thirteen of 17 Fed policymakers expected to raise interest rates in 2015, down from 15 at the bank’s June meeting. However, the greenback recovered against the Norwegian Kroner, changing hands at NOK8.0984 up 0.37%, as commodities linked currencies continued to feel the heat. The German DAX closed marginally higher and France’s CAC 40 index rose 0.2 percent, while the U.K.’s FTSE 100 fell 0.7 percent.

The dollar index, which tracks the USA unit against a basket of six major counterparts, was down about 0.1 percent at 95.297, but still above a three-week low of 94.913 plumbed on Monday as investors pondered what the US central bank will announce at 1800 GMT. “But at the same time, it will indicate that it is highly likely to raise rates by the end of the year”, Nomura Securities fixed income analyst Tomoaki Shishido said.

“It’s all just position-squaring pre-Fed, which is really the key”, she said.

Woodside Petroleum eased almost 0.9 per cent as West Texas crude fell back to $US46.88 a barrel.