American Greenback Hits 4-Month Low As Fed Res. Heralds Interest Rate Cuts in 2024
TEHRAN (Tasnim) – The dollar dropped to a fresh four-month low on Thursday after the US Federal Reserve indicated that its interest-rate hike cycle has ended and that lower borrowing costs are coming in the coming year (2024).
On a busy day for policy announcements in Europe, the Norwegian crown strengthened after a rate hike, while the Swiss franc was little changed after the Swiss National Bank held rates. The Bank of England (BoE) and European Central Bank (ECB) announce policy later in the day.
Fed Chair Jerome Powell said at Wednesday's Federal Open Market Committee (FOMC) meeting that the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming "into view". Policymakers were nearly unanimous in their projections that borrowing costs would fall in 2024, Reuters reported.
"Every vehicle of Fed communication – the statement, the dots, and Powell's press conference – was unambiguously dovish," said RBC strategist Blake Gwinn.
"This shift was perhaps most obvious when the Fed chair admitted that the committee discussed the appropriate timing of cuts at the meeting."
The US dollar index , which measures the greenback against a basket of currencies, slipped as far as 102.42, its lowest since mid-August. It was last down 0.3% at 102.57.
Markets are now pricing a more than 85% chance of a rate cut in March, according to CME FedWatch tool, compared with 40% a day before. Traders are pricing in a one-in-five chance that the Fed cuts rates next month, the report added.