Dollar index soars in reaction to hawkish stance by US Fed

The US dollar index rose sharply and is hovering at its best level in nearly two years in reaction to US FOMC. The Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year. The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent. The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September. The hawkish outlook lifted US benchmark treasury yields to 4.5% and dollar index that measures the greenback against a basket of currencies to a 2-year high near 108 mark yesterday. Currently, the index is quoting at 107.83, up 0.07% on the day following a more than 1% spike in the previous session. Among basket currencies, EURUSD and GBPUSD are staying almost flat at $1.0418 and $1.2578 respectively. Meanwhile, investors are also awaiting monetary policy decisions from the Bank of Japan and the Bank of England.

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