(Bloomberg) -- The dollar rose in the aftermath of the Federal Reserve’s supersized rate cut, with traders waiting for decisions from the UK and Japanese central banks over the next 24 hours to assess their combined impact on markets.
The greenback gained against virtually every major currency after the Fed delivered a half percentage point rate cut, a move usually reserved for a crisis, while paving the way for more measured easing going forward. Sovereign bonds from the US as well as Australia and Japan came under pressure, while most stock indexes in Asia fell in early trade.
“Markets are heading into a crucial window now with the Bank of Japan being one of the big risks,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “There’s an admission in markets of being unsure, and so the gameplan is to take risk off the table — buy dollar, consolidate on Treasuries, bond bets.”
Bloomberg’s dollar gauge rose as much as 0.4% on Thursday, extending gains for a third straight session, while the yen and Swiss franc led losses against the world’s reserve currency. In addition to more immediate rate decisions, investors will also have to grapple with the upcoming US elections and geopolitical risks as they plot the greenback’s path.
“The dollar’s losses this quarter went overboard,” said Charu Chanana, global market strategist at Saxo Markets. The currency should fall if other economies perform better than the US, though “looking at the eurozone or China, or even with Canada entering a deflation, I do not have conviction in a sustained dollar selloff for now,” she added.
Treasury 10-year yields rose two basis points to 3.72% while similarly-dated Japan yields advanced three basis points to 0.85%. Australia’s three-year yields rose as much as 11 basis points to 3.57% as traders trimmed RBA rate cut bets after resilient jobs numbers.
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