By Chibuike Oguh, Harry Robertson and Rae Wee
NEW YORK/LONDON/SINGAPORE (Reuters) -The dollar hovered near a two-year high on Thursday after the Federal Reserve cut rates and signaled a much slower path of monetary policy easing through 2025, while the yen weakened against of the dollar after the Bank of Japan kept interest rates stable.
The dollar rose slightly after losses early in the session after a stronger-than-expected third-quarter US GDP outcome showed the economy grew 3.3% year-on-year.
This figure confirmed the Federal Reserve’s cautious new, slow approach to easing, as well as a larger-than-expected drop in unemployment insurance claims to 220,000 last week.
Currencies around the world tumbled on Wednesday after the Fed’s decision lifted yields and boosted the dollar, although many currencies recovered on Thursday in choppy trading conditions with lean volumes ahead of the holiday season.
The , which measures the dollar against six rival currencies, hit a high of 108.480 during the session, surpassing the 108.180 it reached in the previous session, which is the highest level since November 2022. It was last up 0.08% increased to 108,360.
The week was packed with the final central bank policy meetings of 2024. The BOJ kept rates steady as expected, but the yen fell sharply as Governor Kazuo Ueda gave little away at a press conference after the meeting.
The dollar rose 1.63% against the yen to 157.55, trading at its highest level since July.
“The main focus was on central bank decisions, which were generally very supportive for the dollar. The Fed aggressively cut rates and the Bank of Japan took a dovish stance, and those were probably the two most important factors ” says Vassili Serebriakov, FX. strategist at UBS in New York.
Investors had been watching for indications of an impending tightening by the BoJ, especially after the Fed struck an hawkish tone at its meeting a day earlier.
But the governor reiterated that policymakers would need more time to assess incoming economic data and the implications of newly-elected US President Donald Trump’s policies.
The Fed’s fallout continued to ripple through financial markets as traders pushed back heavily on dovish expectations next year.
The euro, which tumbled 1.34% on Wednesday, managed to pare some losses and was last up 0.16% at $1.036650.
“Interest rate expectations have risen in the US since the election, but outside the US they have fallen, whether you look at the ECB or most other central banks,” said Ronald Temple, chief market strategist at Lazard (NYSE:) in New York .
‘And that leads to a strengthening of the dollar as interest rate differentials widen in favor of the US. So I think you should expect further dollar strengthening because I don’t believe the interest rate markets or the currency markets have fully priced in the implications of rates. “
The Bank of England kept interest rates at 4.75% on Thursday, as expected. Sterling fell, weakening 0.58% to $1.25.
The Canadian dollar fell to the lowest point in more than four years, at 1.44 per US dollar. The South Korean won fell to its weakest level in fifteen years.
Fed Chairman Jerome Powell said further cuts in borrowing costs now depend on further progress in reducing stubbornly high inflation, sending global stock prices tumbling and bond yields rising. The yield on US 10-year benchmark bonds rose 7.2 basis points to 4.57%.
The Swedish and Norwegian krone both recovered against the dollar on Thursday after Sweden’s Riksbank cut rates, but Norway’s Norges Bank kept them steady.
The Swedish krona strengthened 1% against the dollar to 11.026, while the Norwegian krona gave up earlier gains and fell 0.58% to 11.45.
The stock fell to a two-year low before rallying again. Data on Thursday showed New Zealand’s economy fell into recession in the third quarter. The currency last rose 0.16% against the dollar at $0.5632.
The Australian dollar bottomed at $0.6199, a two-year low, but was last up around 0.37%.
Currency bid prices at December 19 21:21 GMT
Description RIC Last US Close Previous session Pct Change YTD Pct High bid Low bid
Dollar index 108.4 108.26 0.13% 6.93% 108.48 107.81
Euro/Dollar 1.0362 1.0351 0.1% -6.12% $1.0422 $1.0348
Dollar/yen 157.34 154.75 1.67% 11.55% 157.77 154.5
Euro/yen 163.04 160.26 1.73% 4.76% 163.8 159.87
Dollar/Swiss 0.8984 0.901 -0.32% 6.72% 0.9022 0.895
Sterling/Dollar 1.2496 1.2574 -0.6% -1.79% $1.2665 $1.2497
Dollar/Canadian 1.4389 1.4449 -0.4% 8.55% 1.4466 1.4346
Aussie/Dollar 0.6238 0.6218 0.33% -8.49% $0.6265 $0.6199
Euro/Swiss 0.9308 0.9328 -0.21% 0.24% 0.9355 0.9307
Euro/British Pound 0.8289 0.823 0.72% -4.36% 0.8293 0.8223
New Zealand dollar/dollar 0.563 0.5624 0.18% -10.84% $0.5662 0.5608
Dollar/Norway 11.448 11.3836 0.56% 12.95% 11.4594 11.2839
Euro/Norway 11.8616 11.7879 0.63% 5.68% 11.877 11.754
Dollar/Sweden 11.0294 11.1267 -0.87% 9.56% 11.1366 10.9966
Euro/Sweden 11.4289 11.5226 -0.81% 2.73% 11.5355 11.4276
