Dollar at two-year high after Fed cuts rates as expected

Parvez Jabri August 1, 2019

NEW YORK: The US dollar rose as high as $1.063 against the euro on Wednesday, its strongest level since May 2017, after the Federal Reserve cut interest rates by 25 basis points as expected.

The dollar index, which measures the currency against a basket of six rivals, also rose to its highest since May 2017 at 98.683. It was last up 0.47% to 98.510. Although interest rate cuts are intended to weaken the currency, the dollar jumped as Fed Chair Jerome Powell during the subsequent press conference called the cut a mid-cycle policy adjustment, as opposed to the start of a rate-cutting cycle.

The gains against the euro also reflect market expectations that US assets will benefit if global central banks follow the Fed in cutting rates.

Policymakers moved the US central bank’s benchmark overnight lending rate to a target range of 2.00% to 2.25%, citing concerns about the global economy and muted US inflation, and signaled a readiness to lower borrowing costs further if needed.

“They acknowledged strong labor markets, recent reasonable signs of moderate growth. It still leaves the playing field wide open as to what they’re going to do in future months,” said Tony Bedikian, head of global markets at Citizens Bank in Boston.

Copyright Reuters, 2019

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