Dollar index hits two-year high after Fed delivers rate cut
Dollar index hits highest since Nov 2022
Euro drops to three-week low
Swiss franc jumps to highest since July
Bitcoin drops by 5%
Updates headline, lead paragraph and prices throughout; adds Powell comments
By Chibuike Oguh
NEW YORK, Dec 18 (Reuters) -The U.S. dollar advanced against its peers on Wednesday, hitting its highest level in two years, after the Federal Reserve delivered a widely expected interest rate cut while also indicating it would slow the pace of its monetary policy easing cycle.
The Fed lowered its benchmark policy rate by 25 basis points to the 4.25% to 4.50% range, with officials signaling they would likely pause future rate cuts next year given a stable labor market and inflation. The yield on benchmark U.S. 10-year notes US10YT=RR rose 6.1 basis points to 4.446%, hitting a four-week high.
"The Fed increased its core inflation forecast and adjusted the dot plot; so rate cuts are being priced out and I think we have one more rate cut priced in for next year and that's less than it was before," said Axel Merk, president and chief investment officer at Merk Hard Currency Fund in Palo Alto, California.
"So the initial take by the market is it's hawkish and that it's dollar-positive."
The dollar strengthened 0.89% to 0.90020 against the Swiss franc CHF=EBS, after reaching as high as 0.90150 - its highest level since July. The euro EUR=EBS was down 1.17% at $1.03695, dropping to a three-week low.
The U.S. dollar index =USD, which measures the greenback against six rivals, rose to as high as 108.260, hitting its highest level since November 2022. It was last up 1.08% at 108.08.
Fed Chair Jerome Powell said in his press conference that it was "appropriate to move forward cautiously and look for progress on inflation", adding that the labor market is softening.
The greenback jumped to a 15-1/2-year high versus the South Korean won KRW=, hitting 1,454.41 - the highest since March 2009. It was last up 1.03% at 1,452.19 per dollar.
The dollar strengthened 0.78% to 154.63 against the Japanese yen JPY=EBS, hitting a three-week high. The Bank of Japan is expected to leave rates unchanged on Thursday.
The Bank of England is also expected to hold rates steady on Thursday. Sterling edged lower versus the euro EURGBP=EBS and against the dollar GBP=D3 following the Fed's decision. The currency GBP=D3 weakened 0.98% to $1.25860, dropping to a three-week low.
Sweden's Riksbank is widely expected to cut rates by as much as half a point, while the Norges Bank is set to leave rates unchanged. The Norwegian crown dropped 1.54% to $11.3677 NOK=D3, while the Swedish crown SEK= weakened 1.38% versus the dollar to 11.1087.
The Australian dollar AUD=D3 slid to $0.62225, its lowest since October 2022. New Zealand's kiwi NZD=D3 touched a fresh two-year low of $0.56540.
The offshore yuan CNH=D3 traded at 7.321 per dollar on Tuesday, holding steady near a 13-month low against the dollar.
Bitcoin fell as much as 5% after Powell said the Fed has no desire to be involved in any government effort to hold large amounts of the world's largest cryptocurrency. It fell 5.34% to $100,734.
Currency bid prices at 18 December 09:05 p.m. GMT | |||||||
Description | RIC | Last | U.S. Close Previous Session | Pct Change | YTD Pct | High Bid | Low Bid |
Dollar index | =USD | 108.06 | 106.93 | 1.08% | 6.60% | 108.26 | 106.82 |
Euro/Dollar | EUR=EBS | 1.0371 | 1.0492 | -1.15% | -6.04% | $1.0513 | $1.0344 |
Dollar/Yen | JPY=D3 | 154.64 | 153.54 | 0.71% | 9.63% | 154.72 | 153.36 |
Euro/Yen | EURJPY= | 160.4 | 161.02 | -0.39% | 3.04% | 161.55 | 159.82 |
Dollar/Swiss | CHF=EBS | 0.9003 | 0.8926 | 0.85% | 6.96% | 0.9021 | 0.8919 |
Sterling/Dollar | GBP=D3 | 1.2581 | 1.2711 | -1% | -1.11% | $1.273 | $1.2563 |
Dollar/Canadian | CAD=D3 | 1.4435 | 1.431 | 0.89% | 8.91% | 1.4444 | 1.4305 |
Aussie/Dollar | AUD=D3 | 0.6222 | 0.6337 | -1.75% | -8.68% | $0.634 | $0.6223 |
Euro/Swiss | EURCHF= | 0.9337 | 0.9364 | -0.29% | 0.55% | 0.9388 | 0.9324 |
Euro/Sterling | EURGBP= | 0.8243 | 0.8251 | -0.1% | -4.9% | 0.8277 | 0.8231 |
NZ Dollar/Dollar | NZD=D3 | 0.5656 | 0.5754 | -1.65% | -10.44% | $0.5758 | 0.5654 |
Dollar/Norway | NOK= | 11.3658 | 11.1934 | 1.54% | 12.14% | 11.3964 | 11.1838 |
Euro/Norway | EURNOK= | 11.7908 | 11.7437 | 0.4% | 5.05% | 11.797 | 11.736 |
Dollar/Sweden | SEK= | 11.1007 | 10.9572 | 1.31% | 10.27% | 11.142 | 10.9398 |
Euro/Sweden | EURSEK= | 11.5236 | 11.4967 | 0.23% | 3.58% | 11.5395 | 11.481 |
Reporting by Chibuike Oguh in New York and Stefano Rebaudo; editing by Nicholas Yong, Peter Graff, Angus MacSwan and Jonathan Oatis
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