LONDON/SINGAPORE (Reuters) – The dollar rose and recovered some of yesterday’s losses, after the Federal Reserve indicated it expected only one rate cut this year. The latest data on US inflation, lower than expected, partially limit the appreciation of the exchange rate.
Yesterday the US central bank confirmed the Fed Funds reference at 5.25-5.5%, while the median projection on the number of cuts for the year fell to a single move, compared to the three indicated in March.
Despite Fed projections, markets continue to expect nearly two 25 basis point rate cuts this year.
“Markets see a weakening of the dollar, with intermediate fluctuations,” explains Imre Speizer, strategist at Westpac in Auckland. “This is (mostly) due to the Fed rate cuts still priced in for this year.”
Around 11.30 am, the euro, which in recent days has come close to six-week lows, barely moved around $1.08, after rising by 0.64% in yesterday’s session.
The Bank of Japan’s monetary policy meeting ends tomorrow and the market is expecting an announcement or signal that the bank will abandon massive ‘quantitative easing’ to allow a further rise in market rates.
(Translated by Chiara Scarciglia, editing by Alessia Pé)
