Dollar at Low as Fed Cuts Rates, Maintains Outlook
A Bloomberg gauge of the dollar fell alongside Treasury yields after the Federal Reserve cut borrowing costs by a quarter-point and maintained projections for another reduction next year, while also authorizing new reserve management purchases of Treasury bills.
The Bloomberg Dollar Spot Index falls 0.5% to day’s low as Chair Jerome Powell speaks in Washington.
FOMC votes to lower target range for fed funds by 25bp to 3.50% to 3.75%; separately, will begin buying $40 billion of Treasury bills per month starting Dec. 12
“Uncertainty about the economic outlook remains elevated,” the Fed’s statement said. “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months”.
“Inflation compensation, breakevens are at very comfortable levels,” Powell said when queried by Bloomberg about moves in long bonds
US 10-year yield down 5bp to 4.14%; two-year yield down 8bp to 3.54%.
Earlier, loonie fell to day’s low after Bank of Canada’s own interest-rate hold, then sharply reverses losses later in NY session.
USD/CAD now down 0.4% to 1.3786, weakest mark for pair since Sept. 22.
“Uncertainty remains elevated,” the BOC’s statement read. “The Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target”.
USD/JPY falls 0.6% to 155.96 as selling accelerates post-Fed
Earlier, leveraged accounts sold into fix-related demand for dollars, according to an Asia-based FX trader.
EUR/USD rises 0.6% to 1.1700, the strongest mark since Oct. 17.
Money markets now favor a rate hike by the European Central Bank in 2026.
Source : Bloomberg.com
