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Dollar remains near 2-year high on Thursday, driven by Fed’s rates indications
(MENAFN) The dollar remained near a two-year high on Thursday, buoyed by the Federal Reserve's indication of a slower pace for interest rate cuts next year. In contrast, the yen weakened after the bank of Japan opted to keep interest rates unchanged, maintaining its cautious approach to monetary policy. The diverging strategies between the two central banks highlighted the growing strength of the dollar against other currencies.
The hawkish stance of Federal Reserve Chairman Jerome Powell and his team has caused a sharp shift in market expectations regarding monetary policy easing in 2024. This has triggered a broad rally for the dollar, with currencies such as the Swiss franc and the Canadian dollar hitting record lows during early Asian trading on Thursday. The Fed’s communication appears to have reinforced confidence in the dollar as traders adjust to a prolonged period of higher U.S. interest rates.
Nick Rees, chief FX analyst at Monex Europe, commented on the Federal Reserve’s decision, describing it as the potential start of a longer pause in rate adjustments, even though it may be too early to confirm definitively. Rees stated that he expects U.S. interest rates to remain unchanged at least through the first half of 2025, noting that this outlook supports the dollar's strength in the months ahead.
Meanwhile, the Bank of Japan maintained its benchmark interest rates on Thursday, aligning with market expectations. Policymakers indicated a preference for more time to evaluate whether wage growth would become more widespread and sustain inflation consistently around the 2 percent target. The decision reflects Japan’s cautious approach to monetary adjustments, contrasting with the Fed’s more assertive tone and further emphasizing the divergence in global monetary policies.
The hawkish stance of Federal Reserve Chairman Jerome Powell and his team has caused a sharp shift in market expectations regarding monetary policy easing in 2024. This has triggered a broad rally for the dollar, with currencies such as the Swiss franc and the Canadian dollar hitting record lows during early Asian trading on Thursday. The Fed’s communication appears to have reinforced confidence in the dollar as traders adjust to a prolonged period of higher U.S. interest rates.
Nick Rees, chief FX analyst at Monex Europe, commented on the Federal Reserve’s decision, describing it as the potential start of a longer pause in rate adjustments, even though it may be too early to confirm definitively. Rees stated that he expects U.S. interest rates to remain unchanged at least through the first half of 2025, noting that this outlook supports the dollar's strength in the months ahead.
Meanwhile, the Bank of Japan maintained its benchmark interest rates on Thursday, aligning with market expectations. Policymakers indicated a preference for more time to evaluate whether wage growth would become more widespread and sustain inflation consistently around the 2 percent target. The decision reflects Japan’s cautious approach to monetary adjustments, contrasting with the Fed’s more assertive tone and further emphasizing the divergence in global monetary policies.
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