Investing.com – The dollar extended losses against its major rivals on Thursday, plumbing three-week lows after the Federal Reserve dialed back its predictions of future rate hikes this year, amid increasing uncertainty over the global economic outlook.
The Fed left interest rates on hold at the conclusion of its meeting on Wednesday and said it would be “patient” before making any further rate hikes, dropping its guidance that ‘further gradual’ rate rises will be needed.
“The Fed has went as far as expectations were raised in terms of being dovish..the responsive reaction by the Fed means that the chances of a recession have faded,” said Michael McCarthy, chief markets strategist at CMC Markets.
“The dollar index can hit 93.5 if the support level of 95 is broken…I expect commodity currencies such as the Aussie, and Canadian dollar to do well.”
The Australian dollar was higher, with rising 0.34% to 0.7268 after rallying 1.36% on Wednesday.
The , a gauge of its value versus six major peers, was down 0.13% to 94.91 by 03:37 AM ET (08:37 GMT), close to a three-week low after falling 0.5% on Wednesday.
The greenback had been on the back foot even before the Fed’s dovish signal, with policymakers in recent weeks signaling that a cautious approach would be taken after the U.S. central bank hiked rates four times in 2018.
Not surprisingly, analysts are bearish on the dollar, as the U.S. – China trade war and rising pressure on global growth threaten to hit the U.S. economy. The greenback had outperformed last year thanks to the rate hikes and the robustness of the U.S. economy.
Global markets have been rattled by a slew of weaker-than-expected growth data out of and over recent weeks, and the International Monetary Fund downgraded its outlook for global growth last week.
The dollar was weaker against the yen, with losing 0.31% to trade at 108.66.
The euro pushed higher, with advancing 0.23% to 1.1504 as the dovish Fed offset a sharp slowdown in in December.
The pound was also stronger against the U.S. currency, with up 0.21% to 1.3142, but gains looked likely to be held in check amid ongoing uncertainty over Britain’s plans to avoid a no-deal Brexit.
Sterling was little changed against the euro, with holding at 0.8746.
— Reuters contributed to this report
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