Dollar lower as traders see US rates peaking, eyes on BoE
By Samuel Indyk
LONDON (Reuters) — The dollar fell broadly on Thursday, with risk-sensitive Asia-Pacific currencies leading gains as investors grew more convinced of a likely peak in U.S. interest rates after the Federal Reserve left them on hold.
Focus now turns to the Bank of England and whether it conveys a similar message at today's policy announcement.
Fed Chair Jerome Powell left the door open to another hike, but with the funds rate target ceiling at 22-year high of 5.5% he said the risks of doing too much or too little were now balanced.
Markets took that as a green light to stick with a sub 20% chance that rates will rise in December. Ten-year Treasury yields are down 23 basis points from Wednesday's highs, equities rallied and risk-sensitive currencies bounced.
«Powell had the opportunity to raise a bit of concern with the latest rise in short-term inflation expectations but he chose not to do that,» said Kristoffer Lomholt, head of FX research at Danske Bank.
«There was a possibility of sending a much more hawkish signal but he chose not to and I think that's what markets are reacting to.»
The dollar index, which measures the currency against six major peers, was last down 0.1% at 106.41 and down by around 0.8% from Wednesday's high.
The euro rose 0.3% to $1.0598, the Swiss franc rose for a second day in a row and the yen was helped further from a one-year low to 150.155 per dollar.
The yen has been struggling for traction, even as the Bank of Japan on Tuesday made another relaxation of its yield curve control policy.
A fall to a one-year low of 151.74 per dollar and 15-year low of 160.83 per euro after the BoJ's announcement had traders on watch for possible intervention to prop up the currency.
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