(Adds missing "cuts" in first bullet, no other changes to text)
*
Steepening yield curve indicates upcoming rate cuts
*
Dollar index hit lowest in more than a year
*
Dollar strengthens versus yen ahead of key BOJ decision
*
Sterling jumps after BoE
By Chibuike Oguh and Stefano Rebaudo
NEW YORK, Sept 19 (Reuters) - The U.S. dollar slipped in
choppy trading on Wednesday as markets grappled with the
supersized 50 basis point interest rate cut, as well as the
switch to an easing monetary policy stance delivered by the
Federal Reserve.
Investor expectations had largely shifted towards a dovish
outcome in the days leading up to the Fed's move on Wednesday,
with money markets pricing in around a 65% chance of a 50 basis
point (bp) cut. But economists polled by Reuters were leaning
towards a 25 bp cut.
"The interesting thing is the half point cut, which was
pretty much unexpected or at least only half and half yesterday,
has not really given the dollar extra damage - which is quite
surprising," said Joseph Trevisani, senior analyst at FXStreet
in New York.
The dollar index, which measures the greenback
against a basket of six peers, was down 0.38% to 100.64 after
reversing gains made in early trading. It slid to its lowest in
more than a year of 100.21 in the previous session.
The euro strengthened 0.4% to $1.1163. Against the
yen, the dollar was 0.33% higher at 142.73 as markets
anticipate that the Bank of Japan will leave interest rates
unchanged on Friday.
The dollar weakened 0.08% to 0.847 against the Swiss franc
and dropped 0.34% to 7.070 versus the offshore Chinese
yuan.
"What it's really doing I think is giving permission, if you
will, for the other central banks around the world, some of whom
have started to cut rates already, to go further with their rate
cuts," Trevisani said.
Money markets priced in 72 bps of additional rate cuts in
2024 and 192 bps by September 2025.
The U.S. Treasury yield curve, which measures the gap
between yields on two- and 10-year Treasury notes
and seen as an indicator of economic expectations, steepened and
hit its highest since June 2022. It was last at a positive 13.4
basis points, indicating more upcoming rate cuts.
Initial claims for state unemployment benefits dropped
unexpectedly to 12,000 last week, according to Labor Department
data on Thursday, suggesting labor market growth.
Fed policymakers on Wednesday projected the benchmark
interest rate would fall by another half of a percentage point
by the end of this year, a full percentage point next year and
half of a percentage point in 2026.
"The initial interpretation of the decision was that it was
dovish and while it was basically even odds that it was going to
happen, overall, on the surface, it's still a dovish move," said
Eugene Epstein, head of trading & structured products North
America at Moneycorp in Boston.
"Everything reversed basically by the end of the day, so you
can make the argument as a bit of buy the rumour, sell the fact.
A lot of dovishness was already priced in."
The pound hit its highest since March 2022 versus the dollar
after the Bank of England's Monetary Policy Committee (MPC)
voted 8-1 to keep rates on hold. Sterling was up 0.5% against
the greenback at $1.3278 after reaching as high as $1.3314
.
The Australian and New Zealand dollars drew support from
domestic data surprises. Australian employment exceeded
forecasts for a third straight month in August.
The Aussie was up 0.77% to $0.6815.
The kiwi, meanwhile, traded 0.58% higher at
$0.6244, after data showed the New Zealand economy contracted by
0.2% in the second quarter.
Currency bid prices at 19
September? 07:17 p.m. GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 100.62 101.02 -0.39% -0.74% 101.47 100.51
Euro/Dollar 1.1162 1.1118 0.4% 1.13% $1.1179 $1.1069
Dollar/Yen 142.61 142.3 0.22% 1.11% 143.875 141.885
Euro/Yen 1.1162? 158.18 0.64% 2.29% 159.96 157.79
Dollar/Swiss 0.8469 0.8463 0.06% 0.62% 0.8515 0.845
Sterling/Dollar 1.3276 1.3214 0.51% 4.37% $1.3314 $1.3155?
Dollar/Canadian 1.3559 1.3606 -0.34% 2.29% 1.3648 1.3534
Aussie/Dollar 0.6812 0.6764 0.73% -0.07% $0.6839 $0.6738
Euro/Swiss 0.945 0.9408 0.47% 1.79% 0.9465 0.9406
Euro/Sterling 0.8406 0.8414 -0.1% -3.02% 0.8423 0.8392
NZ Dollar/Dollar 0.6243 0.6208 0.65% -1.12% $0.6269 0.6183
Dollar/Norway 10.4931? 10.5877 -0.89% 3.53% 10.6504 10.4394
Euro/Norway 11.7134 11.7726 -0.5% 4.36% 11.7929 11.6517
Dollar/Sweden 10.1611 10.2057 -0.44% 0.93% 10.2535 10.1143
Euro/Sweden 11.3423 11.3478 -0.05% 1.95% 11.3597 11.2923
(Reporting by Chibuike Oguh in New York and Stefano Rebaudo;
Editing by Conor Humphries and Aurora Ellis)
Line of Credit 
Print
