The U.S. dollar slumped to a four-month low on Thursday morning as markets digested the Federal Reserve’s final interest rate policy decision of the year during the previous session. The central bank kept interest rates steady at a 22-year high in a range of 5.25%-5.50%, while suggesting that rate cuts will be implemented next year.
Although Fed Chair Jerome Powell refused to rule out further hikes should the need arise, the central bank has largely suggested that its rate-hiking agenda is drawing to a close amid cooling inflation.
“The decisive Fed pivot to rate cuts has pretty comprehensively undercut near-term US dollar prospects,” Richard Franulovich, head of FX strategy at Westpac Banking Corp. wrote in a note to clients.
“While the door is now wide open to the long-awaited big turn in the dollar we still think it is going to take time to develop.” The Bloomberg Spot Dollar Index fell as much as 0.5% to its lowest level since August.