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Fed outcome less hawkish than expected
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Dollar soft; euro, sterling hit new highs
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Fed to start buying Treasury bills to manage market liquidity
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Souring risk mood sends Aussie, cryptos sliding
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SNB leaves rates steady, franc strong
(Adds new comment, updates prices)
By Gertrude Chavez-Dreyfuss and Alun John
NEW YORK/LONDON, Dec 11 (Reuters) - The U.S. dollar stumbled
on Thursday, hitting multi-month lows against the euro, Swiss franc,
and sterling and extending losses from the previous session, after the
Federal Reserve delivered a less hawkish outlook than some had
expected.
The Swiss franc drew support from the Swiss National Bank's
decision to hold interest rates steady. The dollar fell 0.6% versus
the franc to 0.7947, after earlier touching its lowest since
mid-November.
The greenback briefly found support earlier in the session as
Asian shares and U.S. futures slid after disappointing earnings from
U.S. cloud computing giant Oracle reignited fears that
surging AI infrastructure costs could outpace profitability.
But that support faded in the U.S. session.
The euro was last up 0.4% at $1.1740 after earlier hitting
its highest since October 3.
Sterling was last flat on the day at $1.3387 after earlier
touching its highest level in roughly two months.
The dollar also weakened against the yen, shedding 0.3% to 155.61
yen.
The Fed lowered rates on Wednesday by 25 basis points, but, as the
move was widely expected, the reaction reflected much more the broader
messaging, projections and the voting split.
"The market had more hawkish-leaning expectations going into the
Fed meeting and I don't think (Fed Chair Jerome) Powell was especially
dovish, but he kind of left the door open for further cuts," said
Vassili Serebriakov, FX strategist at UBS in New York.
That was in stark contrast with the message given by the
Australian central bank chief and an influential European Central Bank
policymaker suggesting their next moves would be rate hikes.
"We've seen quite aggressive, hawkish repricing of expectations
outside of the U.S. like Australia, Canada, even Europe -- even ECB
(European Central Bank) expectations were more hawkish seemingly
validated by some ECB comments as well," Serebriakov said.
"So it's the Fed being a little more dovish versus what was
expected, but there's also the contrast between the Fed and other
central banks in the G10 where expectations are turning more hawkish."
The dollar was also pressured earlier by data showing that
initial jobless claims increased by the most in nearly 4-1/2 years
last week. Initial claims for state unemployment benefits
jumped 44,000
, the biggest increase since mid-July of 2021, to a seasonally
adjusted 236,000 for the week ended December 6, the Labor Department
said.
LIQUIDITY INJECTION
Also weighing on the dollar, U.S. Treasuries attracted bids and
pushed yields lower after the Fed announced it would start buying
short-dated government bonds from December 12 to help manage market
liquidity levels, with an initial round totalling some $40 billion in
Treasury bills.
That's on top of the $15 billion that the Fed will reinvest in
T-bills starting this month from its maturing mortgage-backed
securities (MBS).
The combined $55 billion in liquidity injection from the Fed is a
positive for market sentiment and risky assets but negative for
safe-haven assets such as the dollar.
Away from the dollar, the Swiss franc strengthened after the Swiss
National Bank left its policy rate unchanged at 0% and said a recent
agreement to reduce U.S. tariffs on Swiss goods had improved the
economic outlook, even as inflation has somewhat undershot
expectations.
The euro fell 0.2% against the Swiss franc to 0.9331.
While the strength of the franc is causing problems for the SNB by
weighing heavily on inflation, the SNB's chairman Martin Schlegel
reiterated that the hurdle for negative rates is high.
Elsewhere, the Australian dollar was hurt by data showing
employment in November fell by the most in nine months. The Aussie
dollar dipped 0.2% to US$0.6663.
Bitcoin, often viewed as a barometer of risk appetite, was
hurt by the tech selloff and briefly slid back below the $90,000
level. It was last hovering slightly above that point, down 1.5% at
$91,008. Ether was down more than 4% at $3,200.
Currency
bid
prices at
11
December?
08:31
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 33
Euro/Doll 683
Dollar/Ye 955
Euro/Yen 89
Dollar/Sw 25
Sterling/ 355?
Dollar/Ca 57
Aussie/Do 627
Euro/Swis 21
Euro/Ster 35
NZ 88
llar
Dollar/No 52
Euro/Norw 92
Dollar/Sw 78
Euro/Swed 015
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