LONDON/SINGAPORE (Reuters) – The dollar rallied and recovered some of yesterday’s losses after the Federal Reserve said it expected just one rate cut this year. The latest US inflation data, lower than expected, partially limits the appreciation of the exchange rate.
Yesterday, the US central bank confirmed a Fed Funds reference of 5.25-5.5%, while the average forecast for the number of cuts for the year fell by one step from three in March.
Despite the Fed’s forecasts, markets continue to expect almost two 25-basis-point rate cuts this year.
“Markets are seeing a weaker dollar with intermediate swings,” explained Westpac strategist Imre Speiser in Auckland. “This is (largely) due to the Fed’s interest rate cuts, which are still in place for this year.”
By 11.30am, the euro, which has been nearing six-week lows in recent days, was barely moving around $1.08 after rising 0.64% in yesterday’s session.
The Bank of Japan’s monetary policy meeting ends tomorrow, and the market is expecting an announcement or signal that the bank will abandon massive “quantitative easing” to allow further increases in market interest rates.
(Translated by Chiara Scarciglia; Editing by Alessia Pe)
