The US dollar rose on Thursday, recovering from an earlier slide following the Federal Reserve’s massive interest rate cut.
The central bank began its monetary easing cycle on Wednesday with a larger-than-usual cut of half a percentage point.
Federal Reserve Chairman Jerome Powell said the move was aimed at showing policymakers’ commitment to keeping unemployment low after inflation eased.
Although investors had anticipated the size of the cut partly because of a series of media reports pointing in that direction ahead of the decision, the large cut defied the expectations of economists polled by Reuters, who were leaning toward a 25 basis point cut.
The normal way markets reacted to the order kept the dollar in good shape during early Asian trading.
The dollar recovered from a more than one-year low against a basket of currencies hit in the previous session, rising slightly to 101.03 before falling slightly.
Against the yen, the dollar rose 0.2% to 142.63, at the time of writing.
The euro fell 0.13% to $1.1133, moving away from a three-week high hit in the previous session.
Another cut
Federal Reserve policymakers forecast on Wednesday:
- Cut the benchmark interest rate by another half percentage point by the end of this year.
- And a full percentage point next year.
- And half a percentage point in 2026.
But they said predictions about that distant future were not necessarily certain.
The pound rose 0.11% to $1.3226 at the time of writing, after hitting a peak of $1.3298 in the previous session, its highest level since March 2022.
This came after data released on Wednesday showed that inflation in Britain was stable in August but accelerated in the services sector, which the Bank of England closely monitors, and this strengthened bets that the central bank will keep interest rates unchanged later in the day.
The Australian dollar rose 0.5% against its US counterpart to $0.6802, while the New Zealand dollar rose 0.2% to $0.6221.
