Dollar Down as Investors Digest Fed Policy Decisions

© Reuters

By Zhang Mengying

AiVIF.com – The dollar was down on Thursday morning in Asia as investors digest a 75-basis points interest rate hike announced by the U.S. Federal Reserve Wednesday.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.15% to 104.780 by 12:57 AM ET (4:57 AM GMT).

The USD/JPY pair jumped 0.42% to 134.30. The Bank of Japan will also hand down its policy decisions on Friday.

The AUD/USD pair edged up 0.15% to 0.7013 and the NZD/USD pair edged up 0.14% to 0.6293.

The USD/CNY pair edged down 0.18% to 6.7015, while the GBP/USD pair fell 0.24% to 1.2147.

The U.S. Federal Reserve raised interest rates by 75 basis points Wednesday to tame inflation after the U.S. consumer price index rose 8.6% year on year in May, the largest since 1994.

The Fed Chair Jerome Powell said the central bank will deliver another big hike in July, but “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.”

“It’s very clear the Fed will do whatever it takes to forcefully reduce inflation and the terminal rate is going to be closer to 4% and maybe even go higher,” Northern Trust (NASDAQ:NTRS) Asset Management director of short-duration fixed income and head of credit research Peter Yi told Bloomberg.

“The Fed is on a path to higher rates and even as Powell tried to downplay another 75 basis points hike next month, he said rates are still extremely low.”

The Fed also said it will shrink its balance sheet by $47.5 billion a month, which will start from June 1 and step up to $95 billion in September.

Investors now await policy decisions from the Bank of England (BOE), which are due later in the day.

On the data front, U.S. housing starts, and initial jobless claims are due later in the day.