(Adds missing “cuts” to the first bullet, no other changes to the text)
By Chibuike Oguh and Stefano Rebaudo
NEW YORK (Reuters) – The U.S. dollar fell in choppy trading on Wednesday as markets grappled with the Federal Reserve’s massive 50 basis point rate cut and switch to dovish monetary policy.
Investor expectations had largely shifted toward dovishness in the days leading up to the Fed’s move on Wednesday, with money markets pricing in a roughly 65% chance of a 50 basis points (bp) cut. But economists polled by Reuters were leaning towards a 25 basis point cut.
“The interesting thing is that the half-point cut, which was pretty much unexpected, or at least only half and half yesterday, didn’t really do any additional damage to the dollar – which is quite surprising,” said Joseph Trevisani, senior analyst at FXStreet in New York. .
The , which measures the dollar against a basket of six peers, fell 0.38% to 100.64 after reversing gains from early trading. During the previous session, the index fell to the lowest level in more than a year: 100.21.
The euro strengthened 0.4% to $1.1163. Against the yen, the dollar was 0.33% higher at 142.73 as markets expect the Bank of Japan to leave rates unchanged on Friday.
The dollar weakened 0.08% to 0.847 against the Swiss franc and fell 0.34% to 7.070 against offshore.
“What I think it really does is give permission, if you will, to the other central banks in the world, some of whom have already started cutting rates, to continue with their rate cuts,” Trevisani said.
Money markets have priced in an additional interest rate cut of 72 basis points in 2024 and 192 basis points in September 2025.
The U.S. Treasury yield curve, which measures the difference between two- and U.S. Treasury yields and is seen as an indicator of economic expectations, steepened to its highest level since June 2022. The curve was last at a positive 13.4 basis points, indicating more upcoming rate cuts.
Initial claims for state unemployment benefits unexpectedly fell to 12,000 last week, Department of Labor data showed Thursday, indicating a growth in the job market.
Fed policymakers predicted on Wednesday that rates would fall another half a percentage point by the end of this year, a full percentage point next year and half a percentage point in 2026.
“The initial interpretation of the decision was that it was a lenient move and while in principle it was equally unlikely to happen, on the face of it it is still a lenient move,” said Eugene Epstein, head of Trading & Structured Products North . America at Moneycorp in Boston.
“At the end of the day, everything was turned around, so you can see the argument as a bit of buy the rumor and sell the fact. A lot of forgiveness was already priced in.”
The pound hit its highest against the dollar since March 2022 after the Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to leave interest rates unchanged. Sterling rose 0.5% against the dollar to $1.3278, after peaking at $1.3314.
The Australian and New Zealand dollars were supported by surprises in domestic data. Australian employment exceeded expectations for the third month in a row in August.
The price rose 0.77% to $0.6815.
The index, meanwhile, traded 0.58% higher at $0.6244 after data showed New Zealand’s economy shrank 0.2% in the second quarter.
Currency bid prices at 19
September 19:17 GMT
Description RIC Last US Close Previous session Pct Change YTD Pct High bid Low bid
Dollar index 100.62 101.02 -0.39% -0.74% 101.47 100.51
Euro/Dollar 1.1162 1.1118 0.4% 1.13% $1.1179 $1.1069
Dollar/yen 142.61 142.3 0.22% 1.11% 143.875 141.885
Euro/yen 1.1162 158.18 0.64% 2.29% 159.96 157.79
Dollar/Swiss 0.8469 0.8463 0.06% 0.62% 0.8515 0.845
Sterling/Dollar 1.3276 1.3214 0.51% 4.37% $1.3314 $1.3155
Dollar/Canadian 1.3559 1.3606 -0.34% 2.29% 1.3648 1.3534
Aussie/Dollar 0.6812 0.6764 0.73% -0.07% $0.6839 $0.6738
Euro/Swiss 0.945 0.9408 0.47% 1.79% 0.9465 0.9406
Euro/British Pound 0.8406 0.8414 -0.1% -3.02% 0.8423 0.8392
New Zealand dollar/dollar 0.6243 0.6208 0.65% -1.12% $0.6269 0.6183
Dollar/Norway 10.4931 10.5877 -0.89% 3.53% 10.6504 10.4394
Euro/Norway 11.7134 11.7726 -0.5% 4.36% 11.7929 11.6517
Dollar/Sweden 10.1611 10.2057 -0.44% 0.93% 10.2535 10.1143
Euro/Sweden 11.3423 11.3478 -0.05% 1.95% 11.3597 11.2923
(This story has been refiled to add the missing word ‘cuts’ in the first bullet point)
