Dollar Weakens as Traders Bet on Fed Rate Cuts
The U.S. dollar fell against a basket of major currencies on Wednesday after comments from Federal Reserve Chair Jerome Powell boosted expectations for several interest rate cuts in the coming months.
Yen and Aussie Lead the Currency Gains
The Japanese yen and Australian dollar were among the top performers, continuing to recover from last week’s sharp declines against the greenback. Analysts also noted support from Beijing’s stronger yuan fixing, which crossed above the 7.1 per dollar level for the first time since last November.
Despite ongoing tariff tensions between China and the United States, the Australian dollar rose as traders favored riskier assets. The yen also rallied, even as uncertainty deepened over Japan’s political leadership. Local reports suggested the parliamentary vote to elect the new prime minister could face delays due to internal disagreements.
Dollar Index Extends Decline
The U.S. dollar index (DXY), which tracks the greenback against six major peers, dropped 0.2% to 98.844 by 05:36 GMT, adding to a similar decline from the previous session.
In a speech on Tuesday, Powell hinted at possible rate cuts, saying the U.S. labor market remains weak with low hiring and limited job losses. He also said that the ongoing government shutdown has not prevented the Fed from assessing economic conditions accurately.
Markets Expect Multiple Fed Cuts
According to LSEG data, traders are pricing in a 0.25% rate cut at the October 28–29 Fed meeting, another in December, and up to three more cuts next year. Analysts at DBS Bank described the market mood as “Goldilocks,” where risk assets remain supported by moderate growth and easy monetary policy.
They added that worries over trade tensions, the shutdown, and inflation have temporarily taken a back seat.
U.S.–China Meeting Eases Market Concerns
U.S. Trade Representative Jamieson Greer reassured investors on Tuesday, telling CNBC that President Donald Trump still plans to meet Chinese President Xi Jinping in the coming weeks. The statement helped ease fears of further escalation in trade tensions.
Currency Moves Around the Globe
The dollar slid 0.4% to 151.23 yen, briefly touching 151.005 yen, and declined 0.2% to 7.1284 yuan in offshore trading. The Australian dollar climbed 0.4% to $0.6514, rebounding from Tuesday’s low of $0.6440, while the New Zealand dollar edged up 0.1% to $0.5718 after a six-month low.
Reserve Bank of New Zealand Chief Economist Paul Conway told Bloomberg TV that the central bank remains open to more rate cuts if needed, following last week’s large reduction.
Euro and Sterling Strengthen Slightly
The euro added 0.1% to $1.1621, extending gains from the previous session as France proposed to suspend its pension reforms. Meanwhile, the British pound rose 0.3% to $1.3355, bouncing back from earlier declines after data showed a slowdown in wage growth.
