Key Points:
- The US dollar hit a near seven-week high against the euro, with the euro falling to its lowest since December 13.
- Jerome Powell, Federal Reserve Chair, opposed a March rate cut, influencing the dollar’s value.
- Amid shifts in US Treasury yields and banking issues, the yen gained against the dollar.
- The US Dollar Index slightly decreased but remained close to its recent peak.
- The probability of a March rate cut dropped from 59% to 38% following the Fed’s decision.
- US economic indicators suggest possible delays in Fed rate cuts, strengthening the dollar’s position.
- The US dollar’s status reflects the interplay of federal policies, market reactions, and economic data, emphasizing its importance in global finance.
The US dollar hit a near seven-week peak versus the euro in currency markets last Thursday, a significant milestone. The increase in value is due to Jerome Powell, Federal Reserve Chair, opposing a rate cut in March. In response, the euro experienced a slight decline, dropping 0.06% to $1.0811, approaching its lowest since December 13.
Yen Gains Edge Over Dollar Amid Market Shifts
The story takes a different turn to the dollar’s performance against the yen. The yen witnessed gains, driven by a decrease in US Treasury yields and issues at New York Community Bancorp, impacting the dollar, which fell 0.06% to 146.81 yen.
Dollar Index Nears Recent Peak: Rates Unchanged
The broader US Dollar Index, a measure of the dollar’s value against a basket of other currencies, showed a marginal decrease, down by 0.07% to 103.54. While slightly lower, this level is still close to the recent high of 103.82, a peak not seen since December 13.
Shift in Rate Cut Odds: Fed’s Stance Strengthens Dollar
The Federal Reserve’s policy on interest rates is a critical factor influencing these currency dynamics. Recently, the Fed made no changes to interest rates and removed references to potential hikes in their statements. Powell’s declaration that a March rate cut is “not the base case” further solidified this stance. Market strategist Art Hogan summed it up, stating, “We can forget about any more tightening.” This shift in expectations had a significant impact on rate cut probabilities. Before the Fed’s decision, the probability of a March rate cut stood at 59%. Post-decision, it has reduced to 38%.
Underpinning the dollar’s strength is a range of US economic data, which suggests that the Federal Reserve might delay rate cuts. This data supports the dollar’s position, reinforcing its status against other major currencies.
