Dollar Climbs on Fed's Hawkish Stance, Yen Weakens Ahead of BOJ's Move
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The dollar hovered near a two-year high on Thursday after the Federal Reserve signaled a slower pace of rate cuts in 2025, while the yen fell to a one-month low ahead of the Bank of Japan's (BOJ) policy decision.
Fed Chair Jerome Powell's hawkish stance led traders to scale back expectations for rate cuts next year, triggering a broad dollar rally. The Swiss franc, Canadian dollar, and South Korean won all fell to significant lows in early Asia trading. Nick Rees from Monex Europe stated that this could mark the start of a prolonged pause by the Fed, supporting the dollar's upside in the coming months.
The Swiss franc dropped to a five-month low, the Canadian dollar hit a four-year low, and the South Korean won slumped to a 15-year low. In contrast, the dollar index remained steady at 108.15, near its two-year peak of 108.27.
Powell's comments on the need for caution regarding further rate cuts due to persistent inflation have jolted global markets. Attention now shifts to the BOJ and Bank of England (BoE) meetings later Thursday, where both are expected to hold rates steady.
The yen sank to 154.88 per dollar, continuing its decline, as the Fed's slower pace of rate cuts is expected to keep the interest rate gap between the U.S. and Japan wide, putting pressure on the yen. Mizuho Bank's Vishnu Varathan explained that the BOJ will likely maintain its current stance due to fragile household confidence and concerns about potential demand shocks.
The euro rose slightly to $1.0370, recovering from a previous decline, while sterling stayed near a three-week low at $1.25775. The Australian dollar fell to its lowest in over two years, and the New Zealand dollar hit its weakest point since October 2022, pressured further by data showing New Zealand's economy entered a recession in Q3, reinforcing the case for more aggressive rate cuts.
Paraphrasing text from "Reuters" all rights reserved by the original author.
