Global Markets React to Central Banks’ Surprising Moves
Dollar’s Surge Slows Down, Yen Takes a Hit
The US dollar’s remarkable surge to a two-year high on Wednesday was followed by a slight decline on Thursday, as investors digested the Federal Reserve’s decision to slow down rate cuts in 2025. Meanwhile, the Japanese yen plummeted after the Bank of Japan (BOJ) maintained interest rates, defying expectations of a hawkish tone.
Central Banks’ Decisions Send Ripples Across Markets
The BOJ’s decision to keep interest rates steady led to a sharp decline in the yen, with the dollar rising 1.4% against it to reach 157.16, its highest level since July. Investors had been anticipating a more hawkish stance from the BOJ, particularly after the Federal Reserve’s hawkish tone earlier in the week.
Euro and Pound Find Footing Amid Volatility
In the broader market, the euro managed to recover some of its losses, rising 0.5% to $1.0403, while the pound fell after the Bank of England’s decision to hold interest rates at 4.75%. The pound’s decline was attributed to three policymakers voting for a rate cut, surprising investors who had expected only one official to opt for a reduction.
Global Currencies Feel the Pinch
The dollar’s rally sent several currencies tumbling, including the Canadian dollar, which sank to its lowest level in over four years, and the South Korean won, which plummeted to its weakest level in 15 years. However, many currencies found a footing against the dollar on Thursday, as investors adjusted to the new market reality.
Experts Weigh In on Market Expectations
According to Nick Rees, senior FX market analyst at Monex Europe, the Federal Reserve’s decision marks the start of an extended pause in rate cuts, which should support the dollar’s upside over the coming months. Jane Foley, head of FX strategy at Rabobank, noted that the BOJ’s governor, Kazuo Ueda, gave little away in his post-meeting press conference, leading to a less hawkish tone than expected.
Asian Currencies Take a Hit
China’s onshore yuan finished the domestic session at 7.2992 per dollar, its weakest close since November 2023. Australia’s dollar bottomed at $0.6199, a two-year low, before rebounding slightly. The kiwi dropped to a two-year low before also ticking up, as data showed that New Zealand’s economy sank into recession in the third quarter.
Scandinavian Currencies Rebound
The Swedish and Norwegian crowns both rebounded against the dollar on Thursday, after Sweden cut rates but Norway held them steady. As investors continue to navigate the complex landscape of central banks’ decisions, one thing is clear: the road ahead will be marked by volatility and uncertainty.
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