The Dollar Weakened After Powell Rejected a Rate Hike of 0.75%

The dollar weakened against a basket of major currencies on Wednesday (May 4) after Federal Reserve Chairman Jerome Powell dismissed the prospect of a sharp 0.75% rate hike, despite concerns about a sharp rise in inflation.

  • The dollar index against the six major currencies in a basket of currencies was down 0.85% at 102.5860.
  • The dollar was lower against the yen to 128.73 yen from 130.18 yen.
  • The dollar was lower against the Swiss franc to 0.9747 francs from 0.9786 francs.
  • The US dollar was lower against the Canadian dollar to 1.2740 Canadian dollars from 1.2840 Canadian dollars.
  • The euro was higher against the US dollar at $1.0621 from $1.0529.
  • The pound rose to $1.2581 from $1.2491.
  • The Australian dollar rose to $0.7232 from $0.7095.

At its meeting yesterday, the Fed’s Monetary Policy Committee (FOMC) raised short-term interest rates by 0.50% to between 0.75% and 1.00%. This was the first rate hike of 0.50% since May 2000 and the largest rate hike in more than 20 years.

Fed Chairman Jerome Powell said after the meeting that the U.S. labor market is extremely tight and inflation is too high. For this reason, the Fed will accelerate measures to slow inflation while signaling that it could raise interest rates by another 0.50% in the next two meetings. The Fed board has yet to consider a drastic 0.75% rate hike.

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