U.S. dollar retreated across the board on bets of no more Fed rate hikes

The DXY-U.S. dollar index retreated this morning to the nearly 106.20 mark, or 0.40% down, extending overnight losses, as investors increased bets that the Federal Reserve was done raising interest rates.

In a widely anticipated move on Wall Street, the Federal Reserve once again maintained its benchmark interest rate at the current 5.25% to 5.5% target range, following the conclusion of its two-day FOMC monetary policy meeting on November 01.

Adding pressure on the U.S. dollar and Treasury yields, Fed Chair Powell struck a less hawkish tone than markets were expecting, by acknowledging that monetary conditions had tightened substantially in recent months while leaving the door open to one more hike depending on the financial conditions.

In this context, the greenback retreated from its multi-month high of 107 mark hit on Wednesday morning, boosting the Euro to rise nearly $1.0620, Pound Sterling to retest the 1.22 resistance level, while the Japanese Yen rebounded toward the key ¥150 psychological level.

DXY, 30-minutes chart

This is the second consecutive policy meeting (after September’s FOMC) in which the committee left rates unchanged, at a rate that is its highest in 22 years, providing a small relief to consumers and corporations with variable funding sources.

The last rate hike took place at July’s FOMC, where the policymakers voted to raise rates by 25 basis points (0.25%), which brought the short-term federal funds rate to the target range of 5.25% to 5.5%, posting the 11th rate increase since March 2022 aimed at curbing inflation, which stood rose at 4.9% y-y in October.

Federal Reserve, together with other major central banks, has set a goal to bring back inflation at the 2% rate over the long run, applying a tightening of monetary policy by increasing the interest rates and others, affecting economic activity and inflation.