SINGAPORE – The dollar fell on Thursday after the Federal Reserve delivered what some expected to be its latest rate hike, while market focus shifted across the Atlantic to the European Central Bank’s (ECB) rate decision. ) later, that day.
On Wednesday, the Fed raised interest rates by a quarter of a percentage point, as expected, marking the 11th rate hike by the central bank in its last 12 meetings.
Although Fed Chairman Jerome Powell left the door open for another hike in September, traders were unconvinced, sending the US dollar lower across the board.
READ: Fed raises interest rates, leaves door open for another hike
The dollar index was down 0.04 percent at 101.06, far from a two-week high of 101.65 hit earlier in the week, though its losses were muted as money markets had already priced in the 25-point rise. Wednesday basics.
Sterling stabilized at $1.2935, after posting a slight gain against the dollar in the previous session.
“Another hike is possible in the coming months, but we also wouldn’t rule out the (Wednesday) meeting marking the end of the hike cycle,” said Emin Hajiyev, a senior economist at Insight Investment.
“(The United States) is closer to the end of the hike cycle than its peers. A dovish turn from the Fed will likely put downward pressure on the US dollar in the medium term.”
The ECB is the next spotlight as investors expect the central bank to similarly hike rates by 25bp at the end of its policy meeting later on Thursday, focusing on its forward guidance.
READ: ECB authorities are open to further rate hikes last July
Prior to the rate decision, the euro firmed at $1.1083.
“It looks almost certain that the ECB will raise the deposit rate by 25 bps… This should not surprise the market as it has been largely telegraphed,” said Nadia Gharbi, a senior economist at Pictet Wealth Management.
“The real debate is whether the ECB will raise again in September (and beyond).”
Elsewhere, the Japanese yen remained under pressure and fell more than 0.1 percent to 140.43 per dollar ahead of the Bank of Japan’s monetary policy decision on Friday, where it is seen to maintain its ultra-loose policy stance.
BOJ Governor Kazuo Ueda told a key government meeting on Wednesday that the central bank will maintain accommodative monetary conditions for businesses.
The kiwi was up 0.27 percent at $0.6226, while the Australian dollar gained 0.14 percent to $0.6769.
The Australian dollar had fallen almost 0.5 percent in the previous session, after a lower-than-expected inflation reading eased pressure for another rate hike from the Reserve Bank of Australia.
The offshore yuan rose slightly to 7.1433 to the dollar, though it was looking for direction as markets were mixed after China’s leaders pledged at a key Communist Party meeting this week to support the economy but offered very few details on specific measures.
“The second largest economy (in the world) is performing poorly,” said Jarrod Kerr, chief economist at Kiwibank. “China is in a position where it probably needs a little more stimulus to keep things going.”
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