Dollar choppy as risk-off mood, dovish Fed unsettle markets

The risk selloff petered out somewhat in Europe, however, to leave the euro at $1.1704, steady on the day at a near two-month high, after a 0.6% ⁠gain on Wednesday

The dollar found support on Thursday from a broad risk-off mood in markets, but failed to recoup its overnight ​losses against peers such as the euro, yen and sterling after the Federal Reserve delivered a less hawkish outlook than some had expected. Investors in Asia dumped risk assets such ⁠as stocks and cryptocurrencies after disappointing earnings from U.S. cloud computing giant Oracle reignited fears that surging AI infrastructure costs could outpace profitability.

That helped stem the safe-haven dollar’s slide, ⁠which initially faced ‌selling pressure after remarks from Fed Chair Jerome Powell surprised some who had been positioned for a more hawkish tone. The risk selloff petered out somewhat in Europe, however, to leave the euro at $1.1704, steady on the day at a near two-month high, after a 0.6% ⁠gain on Wednesday. Sterling was at $1.13374, also steady after a 0.65% rise on Wednesday.

The dollar also dipped versus the yen. It was down 0.14% at 155.8 yen after a 0.56% drop the previous day.

The Fed lowered rates on Wednesday by 25 basis points but, as the move was widely expected, the reaction reflected much more the broader messaging, projections and the voting split.

“Investors were bracing for a hawkish rate cut. In the end, there were ⁠only two dissenters to the cut and the ​Fed kept a rate cut in their median forecast for 2026,” said Chris Turner, global head of markets at ING.

“Equally, it seems that Chair Powell was reluctant to be boxed into the ‍view that the Fed was now on a pause,” he said.

Heading into the Fed meeting, traders had been wondering whether they would get a similar message to those received from the Australian central ​bank chief and from an influential European Central Bank policymaker suggesting that their next moves would be rate hikes.

Also weighing on the dollar, U.S. Treasuries attracted bids after the Fed announced it would start buying short-dated government bonds from December 12 to help manage market liquidity levels, with an initial round totalling around $40 billion in Treasury bills.

AUSSIE AND CRYPTO HIT

However, while the largest currencies were still focused on the Fed, the most risk-sensitive parts of the market were still being swayed by the weakness in tech stocks.

Bitcoin, often viewed as a barometer of risk appetite, briefly slid back below the $90,000 level, and was last hovering at that point, down 2.4%. Ether was down more than 4% at $3,200. “Even with a softer Fed outlook, the market is still working through the excess leverage from October, so reactions to macro signals are slower than usual,” Gracie Lin, OKX’s Singapore CEO, said of the fall in crypto prices. “The 25-basis-point cut was already priced in… and the wider macro and ⁠geopolitical backdrop is still uncertain. All of that keeps the immediate response muted.”

The Australian dollar also ‌got caught in the flight from risk and fell 0.5% to $0.6644.

Also hurting the Aussie was data showing that

Australian employment.

in November fell by the most in nine months.

The Swiss franc firmed slightly after the Swiss National Bank left its

policy rate unchanged

at 0%, and said a recent agreement to reduce U.S. tariffs on Swiss goods ‌had improved the economic ⁠outlook, even as inflation has somewhat undershot expectations.

The franc last traded at 0.7992 per dollar after hitting its strongest level in nearly a month. It was at 0.9348 to ⁠the euro.

© ZAWYA