Dollar sharply depreciates after Fed's decision to keep interest rates unchanged

The US dollar showed its biggest drop in two weeks after the Federal Reserve left interest rates unchanged. Investors also revised their expectations for a possible rate hike as early as September, Bloomberg reports, writes UNN.

Details

The Bloomberg Spot Dollar Index fell about 0.3% on Wednesday, the biggest one-day drop since July 15. This is also the most significant decline in the index after the Fed's decision to keep rates unchanged in the last two years.

Fed Chairman Kevin Warsh said during a press conference that the rise in Treasury bond yields partially serves as a tightening of monetary policy. After his speech, the yield on 30-year US government bonds rose to its highest level since 2007.

Investors revised expectations for rate hikes

Warsh mentioned the rise in Treasury bond yields since the last meeting as a substitute for rate hikes, which likely lowers market expectations for rate hikes and puts pressure on the dollar

After the Fed's decision, traders estimate the probability of a rate hike in September at just over 50%, while before the meeting markets almost fully priced in such a scenario. Full expectations for a rate hike have now shifted to December.

We had about a 30% probability of a 25 basis point rate hike, but that did not happen. In the long term, we continue to believe that the US dollar has likely already peaked in this cycle, but the further path is unlikely to be sharp

Dollar at 50 - a pessimistic scenario or the nearest prospect21.07.26, 12:18 • 28842 views