Fed Rate Cut Sends U.S. Dollar Reeling: Implications for Global Currencies

The U.S. dollar dropped after the Federal Reserve cut interest rates by 50 basis points and adjusted its monetary policy outlook. The Australian and Norwegian currencies outperformed. Economists anticipated a dovish outcome, leading to significant market adjustments and various currencies gaining traction against the weakening dollar.

The U.S. dollar fell sharply on Thursday following the Federal Reserve's decision to cut its interest rate by 50 basis points. The change came as the central bank revised its monetary policy outlook, impacting global currency markets, including a notable performance by the Australian dollar and the Norwegian crown.

Before the Fed's decision, market expectations had leaned towards a dovish outcome, with money markets pricing around a 65% chance of a 50 basis point cut. Economists surveyed by Reuters predominantly expected a smaller cut of 25 basis points.

The dollar index, which measures the currency against a basket of six peers, fell by 0.30% to 100.57. This marked its lowest point in over a year, highlighting the dollar's recent weakness. Meanwhile, other global currencies experienced mixed reactions, reflecting the complex economic landscape following the Fed's latest policy shift.

(With inputs from agencies.)