HONG KONG- The dollar paused for breath on Thursday, having given up a brief rally made after the US Federal Reserve said it would end pandemic-era bond purchases in March, as investors awaited imminent decisions from other major central banks.
Investors are now sitting tight ahead of meetings from the European Central Bank, the Bank of England, and others before firming up their positions at the end of a busy week for central banks.
The dollar index, which measures the currency against six peers, was last at 96.391, having tested last month’s 16-month high of 96.938 after the Fed’s announcement before retreating to as low as 96.296.
On the other side of the dollar sell-off, the euro advanced 0.25 percent on Wednesday, the pound gained 0.27 percent and the risk-friendly Australian dollar jumped 1 percent.
“It suggests to me that markets were positioned for the Fed being more hawkish than survey expectations would have you believe,” said Ray Atrill head of FX strategy at NAB.
“Also that risk assets took the latest pivot so well reinforces the fact that the US dollar and risk sentiment seem to be negatively correlated.”
All three main US stock indexes reversed earlier losses and climbed into positive territory after the meeting, extending gains as Fed Chair Jerome Powell struck an upbeat tone in a news conference and expressed willingness to raise interest rates as necessary to control inflation. — Reuters
