US dollar rises as expectations for imminent Fed rate cut ebb
NEW YORK, United States — The dollar pushed higher Thursday behind a series of comments from Federal Reserve officials, dimming hopes for imminent interest rate cuts while US stocks finished mostly lower.
Statements over the last day or so from New York Federal Reserve Bank President John Williams and Fed Governor Michelle Bowman have helped lift US Treasury yields as investors bet that the Fed will cut interest rates fewer times, if at all, in 2024, than was initially expected.
Boris Kovacevic, global macro strategist at Convera, said it has become “a perfect environment for the Greenback to shine,” according to a post on X, the former Twitter.
Besides the shift in Fed policy, Kovacevic said the greenback is benefiting as a “haven” investment amid geopolitical worries and by other central banks signaling they will soon cut interest rates.
However, the shifting central bank outlook has weighed on US equities.
READ: Wall Street drifts to a mixed finish as yields tick higher
After gains by bourses in Europe and Asia, the Dow eked out only a modest gain Thursday, but both the S&P 500 and Nasdaq fell.
Yen and won in focus
“Price action feeds on itself,” Karl Haeling of LBBW said of the lackluster session. “People see the market going down and they say, ‘Get me out’.”
Back in currency markets, the yen and won were in focus after US Treasury Secretary Janet Yellen joined her Japanese and South Korean counterparts in saying they were keeping an eye on movements.
READ: Japan unlikely to intervene unless yen slides below 155
The statement came after South Korea’s Choi Sang-mok and Japan’s Shunichi Suzuki shared “serious concerns” about the recent weakness of their currencies and agreed to take “appropriate actions” to counter extreme volatility.
Analysts said the statement with Yellen suggested Washington would not push back against intervention by the countries.
The yen has lost almost 9 percent this year and the won about 7 percent.
“The fact that the yen has resumed its selling suggests traders are now either testing the patience of authorities or calling their bluff, as verbal intervention has so far been ineffective,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
