NEW YORK: The dollar rebounded on Thursday from a dip after the US Federal Reserve repeated it saw high inflation as transitory, while the British pound dropped sharply after the Bank of England defied market expectations and kept rates on hold.
The Fed announced on Wednesday a $15 billion monthly cut to its $120 billion in monthly purchases of Treasuries and mortgage-backed securities, but Chairman Jerome Powell said he was in no rush to hike borrowing costs.
The US dollar seemed to be consolidating and gave up some of its overnight gains at the beginning of the New York session, under pressure from Treasury yields, said Kathy Lien, managing director at BK Asset Management.
“Ultimately, 10-year Treasury yields are down 2.5% and I think that’s going to keep the greenback under pressure. It’s going to be very difficult for the dollar to rally today,” she said.
The BoE said most of it policy members still thought “there was value in waiting for additional inflation on near-term developments in the labour market” before deciding to ease off on stimulus.
But the British central bank kept alive the prospect of tighter monetary policy soon, saying it would probably have to raise rates from all-time lows “over coming months” if the economy performed as expected.
Markets had been pricing in a BoE rate rise, but economists polled by Reuters said the move was too close to call, as Britain, like much of the world, grapples with balancing rate rises to combat inflation without compromising the economic recovery.
The lack of a rate cut sent sterling, which had initially led the gains on the dollar after the Fed, tumbling. It was last down 1.08% at $1.35375.
The dollar index swung back from a low of 93.80 points shortly after the Fed announcement on Wednesday to 94.249 points at 9 a.m. Eastern time on Thursday.
Ether, the second biggest cryptocurrency, hit a record high of $4,670.81 on Wednesday and was last down 1.68% at $4,529.48.
Comments
Comments are closed for this article.