By Karen Brettell and Chibuike Oguh
NEW YORK (Reuters) – The dollar fell after the Federal Reserve cut interest rates by half a percentage point on Wednesday, citing greater confidence that inflation will continue to fall toward the U.S. central bank’s annual target of 2%.
The Fed has lowered the overnight rate to the 4.75%-5.00% range and policymakers see the Fed benchmark rate falling another half percentage point by the end of this year, another full percentage point in 2025 and another half percentage point in 2025. percentage points in 2026 to end in a range of 2.75%-3.00%.
The price last fell 0.53% that day at 100.37, the lowest level since July 2023. The euro rose 0.55% to $1.117575. The dollar weakened 1.07% to 140.825 Japanese yen.
“It’s a milder cut. It certainly wasn’t an aggressive cut,” said Vassili Serebriakov, FX and macro strategist at UBS in New York.
“The way we thought about it before the announcement is that you know a 50 basis point cut is dollar negative. If they had cut by 25 basis points, there were several scenarios in which the dollar could perform. But a 50 basis point cut is unequivocally dollar negative.”
After the Fed’s rate hike, futures on the fed funds rate, which measures the cost of unsecured lending between banks, have priced in about 72 basis points of further rate cuts this year.
A closely watched part of the US Treasury yield curve, which measures the difference between 2022 and 2022 yields, was seen as an indicator of economic expectations, reaching its steepest level since July 2022 following the Fed’s rate cut . It was most recently at 7 basis points.
Sterling, the year’s best-performing G10 currency, rose 0.84% to $1.32730. The yuan strengthened against the dollar at 7.0761 per dollar in offshore trading.
“The market was pretty much 50-50 when this decision was made, so it clearly catches half the market by surprise,” said Brad Bechtel, global head of FX at Jefferies in New York. “And it’s clear the Fed is trying to address and provide support for the slowdown in the US economy. But so far the market reaction hasn’t been too crazy.”
Currency bid prices at 18
September 7:00 PM GMT
Description RIC Last US Close Previous session Pct Change YTD Pct High bid Low bid
Dollar index 100.62 100.91 -0.28% -0.74% 100.96 100.21
Euro/Dollar 1.1145 1.1115 0.27% 0.96% $1.1189 $1.1108
Dollar/yen 141.19 142.42 -0.82% 0.15% 142.28 140.53
Euro/yen 1.1145 158.24 -0.54% 1.13% 158.26 157.06
Dollar/Swiss 0.8433 0.8472 -0.47% 0.2% 0.8467 0.8392
Sterling/dollar 1.3242 1.3163 0.64% 4.09% $1.3298 $1.3157
Dollar/Canadian 1.3575 1.3599 -0.17% 2.41% 1.3608 1.3541
Aussie/Dollar 0.6781 0.6756 0.43% -0.49% $0.682 $0.675
Euro/Swiss 0.94 0.9414 -0.15% 1.23% 0.9416 0.9382
Euro/British Pound 0.8415 0.8444 -0.34% -2.92% 0.8453 0.8405
New Zealand dollar/dollar 0.6229 0.6187 0.69% -1.35% $0.6268 0.6184
Dollar/Norway 10.5649 10.5945 -0.28% 4.24% 10.6202 10.478
Euro/Norway 11.7742 11.7919 -0.15% 4.9% 11.8138 11.7172
Dollar/Sweden 10.1726 10.189 -0.16% 1.05% 10.2196 10.106
Euro/Sweden 11.34 11.3237 0.14% 1.93% 11.3534 11.3012
(This story has been corrected to say that the yuan strengthened against the dollar, rather than the yuan fell, in paragraph 8)
