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SINGAPORE (Reuters) – The dollar rose to a two-year high on Thursday after the Federal Reserve signaled a gradual rate cut in 2025, while the yen fell after the Bank of Japan (BOJ) held off on rates and gave limited information. for his financial position.
The BOJ kept interest rates steady earlier in the day, as expected, sending the yen down to 0.3%.
The Japanese currency extended losses to weaken above 156 to the dollar for the first time in a month when BOJ Governor Kazuo Ueda spoke at a press conference that began at 0630 GMT.
It last traded about 1% weaker at 156.30 per dollar.
While investors were looking for a closer look at the BOJ, especially after the Federal Reserve reacted strongly to the end of its policy the previous day, Ueda’s comments left investors in the dark.
The governor reiterated that policymakers will need more time to evaluate what is coming and what will happen when US President-elect Donald Trump returns to the White House in January.
“The Fed’s stance and the BOJ’s skepticism suggest that the dollar/yen could face more challenges,” said Christopher Wong, chief financial strategist at OCBC.
In the broader market, the hawkish fallout from the Fed on Wednesday continued to dominate markets, with the currency’s move largely felt as investors retreated sharply to lower expectations for next year.
A rally in the US dollar sent peers including the Swiss franc, the Canadian dollar and South Korea all the way down to record lows in early Asian trading on Thursday.
“We think (this) decision signals the start of a long-term pause from the FOMC, although it is too early to say that clearly,” said Nick Rees, chief FX market analyst at Monex Europe.
“We now expect US rates to remain unchanged, until the first half of 2025. If that is the case, then further changes in the market should support the dollar in the coming months.”
That was down to a five-month low of 0.90215 per dollar, while the Canadian dollar hit a four-year low of 1.44655 per US dollar.
The win fell to its weakest level in 15 years, while the Australian and New Zealand dollars also fell to two-year lows.
In sharp contrast, it settled at 108.05, close to Thursday’s two-year high of 108.27.
Fed Chairman Jerome Powell said further cuts in borrowing costs now depend on progress in reducing inflation, making clear – and repeated – statements about the need for caution from now on in sending stocks lower and yield yields lower.
The Bank of England (BoE) announced its decision on Thursday, where it is expected to hold rates.
Before the results, sterling was pegged near a three-week low of $1.26005. The euro meanwhile rose 0.42% to $1.03945, absorbing its 1.34% decline in the previous session.
The bottom, below $0.6199, before coming back slightly to trade 0.26% higher at $0.6234.
The New Zealand dollar also reached its weakest level since October 2022 at $0.5608 and last traded at $0.5639.
This was further boosted by data on Thursday that showed New Zealand’s economy entered the third quarter, strengthening the case for further contraction.
