US dollar tumbles after Fed cuts rates, Powell comments

By Gertrude Chavez-Dreyfuss, Chibuike Oguh and Laura Matthews

NEW YORK, Dec 10 (Reuters) - The U.S. dollar fell against major peers including the euro, Swiss franc, and Japanese yen on Wednesday after the Federal Reserve lowered interest rates in a widely-expected move, but indicated it will likely pause its easing cycle at the next policy meeting in January.

The greenback was further weighed down by comments Fed Chair Jerome Powell in a press briefing after the rate decision, saying that the U.S. central bank's next move is unlikely to be a rate hike. He added that a rate increase is not the base case reflected in new projections from policymakers.

The Fed's decision to lower the benchmark policy rate by a quarter of a percentage point to the 3.50%-3.75% range drew three dissents. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid argued that the policy rate should be left unchanged, while Fed Governor Stephen Miran again advocated for a larger half-percentage-point reduction.

In addition, new projections issued after the U.S. central bank's 25 basis-point rate reduction, showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rates, the Committee will carefully assess incoming data," the Federal Open Market Committee said in a statement, a language that in the past has been used to signal a pause in policy actions.

The greenback lost ground against peer currencies immediately after the Fed's announcement.

In afternoon trading, the dollar fell 0.8% against the Swiss franc to 0.8000 franc and was last down 0.6% at 155.92 against the Japanese yen.

The euro?last changed hands at $1.1691, up 0.6%, while the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, slid 0.6% to 98.66.

"Although the market entered the day fully priced for a rate cut, the dollar's whipsaw reaction following the expected decision underscores the data gaps and shifting narratives driving markets today," said Uto Shinohara, senior investment strategist, at Mesirow Currency Management in Chicago.

"While Powell indicated that the Fed is well-positioned to wait, growing labor concerns and a tariff-induced view on inflation brought the dollar under pressure."

Futures on the fed funds rate, which measure the cost of unsecured overnight loans between banks, raised the odds on Wednesday that the Fed will pause its easing cycle at the next policy meeting in January.

The market has priced in a 78% chance that the Fed will hold interest rates steady next month, compared with a 70% probability just before the rate cut announcement.

But even though the rate forecast from the Fed was for one rate decline next year, the rate futures market still priced in two cuts in 2026 or a fed funds rate of 3.0%.

"The statement emphasized weakness in the labor market as the principal rationale for the 25-basis-point cut, and this detail is what the market has picked up on, suggesting the Fed could continue easing policy, even though the expectations for easing in 2026 haven't changed with one 25 basis point priced in," said Michael Rosen, chief investment officer at Angeles Investments, in Santa Monica, California.

Market participants continued to price out U.S. recession risk given the recent run of data that showed the economy, while exhibiting pockets of weakness in the labor and manufacturing sectors, is not necessarily falling off a cliff.

Data on Tuesday showed U.S. job openings increased marginally in October after surging in September, suggesting the labor market is cooling.

White House economic adviser Kevin Hassett, the front-runner to be the Federal Reserve's next chair, told the WSJ CEO Council on Tuesday there was "plenty of room" to cut interest rates further, though he added that if inflation rose the calculation might change.

Currency ? ? ? ? ? ? ?

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prices at

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Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 98.645 99.216 -0.57% -9.07% 99.258 98.5

index 86

Euro/Doll 1.1692 1.1627 0.58% 12.96% $1.17 $1.1

ar 621

Dollar/Ye 155.95 156.855 -0.35% -0.67% 156.885 156.

n 205

Euro/Yen 182.35? 182.38 -0.02% 11.72% 182.61 182.

01

Dollar/Sw 0.8001 0.806 -0.73% -11.83% 0.8065 0.79

iss 93

Sterling/ 1.3382 1.3297 0.66% 7.02% $1.3389 $1.3

Dollar 297?

Dollar/Ca 1.3794 1.3845 -0.36% -4.06% 1.387 1.37

nadian 84

Aussie/Do 0.6678 0.6643 0.55% 7.94% $0.6686 $0.6

llar 629

Euro/Swis 0.9354 0.9372 -0.19% -0.42% 0.938 0.93

s 45

Euro/Ster 0.8735 0.8741 -0.07% 5.58% 0.8751 0.87

ling 29

NZ 0.5815 0.578 0.62% 3.93% $0.5823 0.57

Dollar/Do 62

llar

Dollar/No 10.0877? 10.1406 -0.52% -11.24% 10.163 10.0

rway 789

Euro/Norw 11.7963 11.7954 0.01% 0.23% 11.833 11.7

ay 857

Dollar/Sw 9.2633 9.3572 -1% -15.92% 9.3725 9.25

eden 39

Euro/Swed 10.8304 10.8818 -0.47% -5.53% 10.896 10.8

en 175

(Reporting by Gertrude Chavez-Dreyfuss, Chibuike Oguh, and Laura Matthews; Editing by Nia Williams, Diane Craft and Nick Zieminski)