Rate Cut Boost: Dollar Regains Strength

19 Sep 2024 , 09:13 AM

The US dollar climbed broadly on Thursday, recovering from an earlier drop in the immediate aftermath of the Federal Reserve’s massive interest rate cut, which had been widely anticipated by markets.

The US central bank began its monetary easing cycle on Wednesday with a larger-than-usual half-percentage-point cut, which Chair Jerome Powell said was intended to demonstrate policymakers’ commitment to maintaining a low unemployment rate now that inflation has fallen.

While the magnitude of the move was anticipated by investors in part due to a flood of media reports pointing in that direction prior to the announcement, it bucked the predictions of economists polled by Reuters, who were leaning towards a 25-basis-point reduction.

Nonetheless, markets reacted in a traditional “buy the rumour, sell the fact” pattern, keeping the dollar in the lead in early Asian trade. It rallied from a more than one-year low versus a basket of currencies in the previous session, closing modestly higher at 101.03.

The dollar rose 0.58% against the yen, reaching 143.12. The euro slipped 0.04% to $1.1113, retreating from a three-week high reached the previous day.

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