Dollar strengthens after post-Federal Reserve volatility.
Arabian Sea Newspaper - Special
**Arab Gulf_Reports:** **The US dollar rose on Thursday after a sharp decline and then a strong rebound, as traders absorbed the implications of the Federal Reserve's cautious stance on interest rate cuts.** **The New Zealand dollar plummeted after data showed the country's economy shrank more than expected in the second quarter, boosting expectations of a larger interest rate cut this year. The Australian dollar also fell after an unexpected drop in employment in August.** **The US Federal Reserve cut interest rates by a quarter of a point on Wednesday, as expected. It indicated that it would gradually reduce borrowing costs for the rest of the year. Federal Reserve Chairman Jerome Powell described the move as a "risk management" cut due to the weak labor market, but stressed that the central bank does not need to rush into monetary easing.** **The dollar fell to its lowest level since February 2022 at 96.224 against a basket of major currencies immediately after the Fed's decision, but quickly rebounded strongly to rise 0.44 percent on the same day to 97.074. It continued its rise on Thursday to record 97.163.** **The Fed's famous "dot plot" indicated expectations of an average additional cut of 50 basis points during the remaining two meetings this year, but predicted only one cut in 2026.** **Elliot Clarke, head of international economics at Westpac, said: "The revised forecasts highlight the uncertainty that still exists regarding the economic landscape." He added that "the timing and size of the expected interest rate cut also indicate continued risks related to inflation."** **The euro fell 0.2 percent to $1.1791, after reaching its highest level since June 2021 at $1.19185 on Wednesday, in a quick reaction to the Fed's announcement. The pound sterling also fell 0.2 percent to $1.3604, after briefly jumping to its highest level since July 2 at $1.3726 in the previous session.** **The Bank of England is expected to announce its monetary policy decision later on Thursday, and is widely expected to keep interest rates at 4 percent. Official figures showed on Wednesday that annual inflation in Britain reached 3.8 percent in August, reinforcing expectations that another interest rate cut is not imminent.** **The dollar rose 0.2 percent against the yen to 147.245 in the latest trading, after falling 0.67 percent to its lowest level since July 7 at 145.495 overnight, before rebounding.** **The Bank of Japan is widely expected to refrain from raising interest rates on Friday, although markets are pricing in a quarter-point rate hike by the end of March, with an almost 50 percent chance of it happening this year.** **The New Zealand dollar fell 0.9 percent to $0.5909, its lowest level since September 8. Data on Thursday showed that GDP fell 0.9 percent in the second quarter compared to the previous quarter, worse than analysts' and the Reserve Bank of New Zealand's expectations, which indicated a decline of 0.3 percent.** **The Australian dollar also fell 0.4 percent to $0.6628 after official figures showed that net employment fell by 5,400 jobs in August on a monthly basis, compared to market expectations that indicated an increase of 21,500 jobs.** **The US dollar added 0.1 percent to 1.3790 Canadian dollars, after the Bank of Canada cut interest rates on Wednesday by a quarter of a point to a 3-year low, citing a weak labor market and receding concerns about underlying inflationary pressures.**
