The dollar fell broadly on Thursday, tracking a slide in U.S. Treasury yields as markets grew more convinced the Federal Reserve was done with its aggressive monetary policy tightening cycle after it left rates unchanged.
The Fed on Wednesday held interest rates steady as widely expected, as policymakers struggled to determine whether financial conditions may be sufficiently tight to control inflation.
However, Fed Chair Jerome Powell acknowledged that a recent market-driven rise in Treasury bond yields, home mortgage rates and other financing costs could have their own impact on the economy as long as they persist.
The decision lifted sentiment in Wall Street, which spilled over into the Asia day, giving a small boost to the risk-sensitive Australian and New Zealand dollars.
The Aussie rose 0.5% to a three-week high of $0.6426, while the kiwi similarly jumped more than 0.5% to hit a two-week top of $0.58825.
The dollar edged broadly lower alongside U.S. Treasury yields which touched multi-week lows in early Asia trade.
The two-year U.S. Treasury yield , which typically reflects near-term interest rate expectations, slid to a nearly two-month low of 4.9250% on Thursday, while the benchmark 10-year yield fell to an over two-week low of 4.7070%.
Against the dollar, the euro rose 0.18% to $1.0589.
The U.S. dollar index fell 0.11% to 106.34.
Traders also drew further conviction that U.S. rates could have peaked after data showed U.S. manufacturing contracted sharply in October, though separate data pointed to a still-resilient labour market, which is likely to see the Fed keeping rates at restrictive levels for longer.
Market pricing shows a nearly 15% chance that the Fed could begin cutting rates as early as next March, according to the CME FedWatch tool, compared with a roughly 10% chance a week ago.
The move lower in the dollar brought some respite for the yen, though it remained on the weaker side of 150 per dollar.
The Japanese currency last stood at 150.44 per dollar, having slid to a one-year low of 151.74 per dollar earlier in the week in the wake of the Bank of Japan's (BOJ) monetary policy decision.
Investors were still struggling to digest the implications of the central bank's piecemeal tweak to its controversial bond yield control policy - a move that has sent Japan's bond market and currency reacting in divergence.
Elsewhere, sterling rose 0.35% to $1.2192 ahead of the Bank of England's rate decision later on Thursday, where expectations are for the central bank to keep rates on hold.
Source : Reuters
