The US dollar has faced another reason for turbulence. On November 7, the Federal Reserve approved its second consecutive cut in the benchmark interest rate. This time, the cut was limited to 25 basis points, following a 0.5% reduction in September. However, the greenback was not thrilled with the move. It just dipped a bit before stabilizing.
This step was widely expected. Fed officials repeatedly hinted at the potential cut at their September meeting and in subsequent speeches. In addition, policymakers made adjustments to the economic outlook, particularly regarding the Fed’s assessment of efforts to reduce inflation while supporting the labor market. "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance," the document stated.
Fed Chairman Jerome Powell signaled his intention to continue lowering interest rates. The head of the regulator is a proponent of a flexible monetary policy, one that allows for both gradual and more aggressive cuts in borrowing costs.
Powell also hinted at the possibility of speeding up the pace of monetary easing if labor market conditions worsen. Market participants interpreted his comments as dovish, putting further pressure on the US dollar.
As a result, the greenback briefly weakened but remained above its previous intraday low of 104.20. Later, the American currency stabilized around the 104.50 level, losing less than 0.05%.
Other markets were also affected by the Fed meeting. Stocks closed higher, with the tech-heavy Nasdaq gaining 1.5%. According to analysts, both the Nasdaq and the S&P 500 indices reached record highs. Meanwhile, Treasury bond yields dropped after a brief surge.
