SINGAPORE- The dollar fell broadly on Thursday after the US Federal Reserve maintained its interest rate cut projections for the year in the face of upside surprises on inflation, and did not strike a more hawkish tone as some investors had feared.
The Australian dollar jumped after data on Thursday showed employment rebounded sharply in February and the jobless rate dived far below forecasts, pointing to a still-tight labor market there.
The Aussie was last 0.33 percent higher at $0.6608, after having risen more than 0.4 percent to a one-week top of $0.6615 in the wake of the strong jobs data.
At the conclusion of the Fed’s policy meeting on Wednesday, Chair Jerome Powell said recent high inflation rate readings had not changed the underlying “story” of slowly easing price pressures in the US as the central bank stayed on track for three rate cuts this year, even though it projected slightly slower progress on inflation.
That knocked the greenback lower as traders were quick to rebuild bets of a Fed easing cycle beginning in June, with markets now pricing in a 75 percent chance of a rate cut that month, as compared to 59 percent chance a day ago, according to the CME FedWatch tool.
The euro and sterling were among major currencies that notched one-week highs against the dollar on Thursday, rising to $1.09375 and $1.2798 respectively.
“The Fed really, really wants its soft-landing ending. Stronger growth, lower unemployment, higher inflation – and yet still no change to the median dot,” said Seema Shah, chief global strategist at Principal Asset Management.
“Powell has perhaps shown his cards: he needs a good reason not to cut rates, rather than a reason to cut rates.”
The dollar index was flat at 103.23, after having slid more than 0.5 percent in the previous trading session.
