The dollar approached its highest level in two years on Thursday after the Federal Reserve (US central bank) indicated a slower pace of cutting interest rates next year, while the yen fell after the Bank of Japan’s decision to keep interest rates unchanged.
The hawkish tendency of US Central Bank Chairman Jerome Powell and his team prompted traders to strongly retreat from expectations of easing monetary policy next year, which sparked a widespread rise in the dollar, which pushed currencies such as the Swiss franc and the Canadian dollar to fall to record levels in early trading in Asia. today.
“We believe the decision marks the beginning of a long pause by the Federal Open Market Committee, even if it is a bit too early to say so explicitly,” said Nick Rees, senior foreign exchange market analyst at Monex Europe.
He added, “We now expect US interest rates to remain stable, at least until the first half of 2025. If this is true, the upward adjustment in market expectations would support the rise of the dollar in the coming months.”
For its part, the Bank of Japan kept interest rates steady on Thursday as expected, confirming that policymakers prefer to spend more time scrutinizing whether wage increases will expand and keep inflation permanently around its 2% target.
Performance of major currencies:
- The yen fell in the immediate aftermath of the decision, falling about 0.3% against the dollar to a one-month low of 155.28, and the Japanese currency was last trading down 1.12% at 156.56 against the dollar.
- The Swiss franc fell to a 5-month low of 0.90215 against the dollar.
- The Canadian dollar fell to its lowest level in more than 4 years to 1.44655 against the dollar.
- The dollar index – which measures the performance of the US currency against 6 other currencies – settled at 108.05, approaching its highest level in two years, which it recorded yesterday by reaching 108.27 points.
- The British pound settled near a 3-week low at $1.25875.
- The euro rose 0.23% to $1.0376, after recovering from a sharp decline of 1.34% in the previous session.
