The dollar got a 'nice bump' from the Fed

The dollar is up Thursday morning after jumping higher the previous afternoon on the Federal Reserve’s announcement that it will begin shrinking its balance sheet and that most Open Market Committee members expect interest rates to go higher later this year.

The US dollar index climbed to about 92.60 minutes after sitting in the red around 91.63 earlier in the day.

It has remained near that level since then, and was around 92.44 at 8:26 a.m. ET.

“The Fed provided the spark for a washout in G10 positioning and nice bump in the USD,” said Mark McCormick, North American Head of FX Strategy at TD Securities.

“[S]till, we believe the Fed’s renewed (short-term) hawkishness does little to change the medium-term trajectory of the USD and like using this bounce to re-establish long exposure to the convergence currencies like EUR, CAD, and AUD.”

The dollar index has fallen by about 10% since US President Donald Trump’s inauguration.

The Federal Reserve announced on Wednesday details of its biggest post-recession policy shifts since it first raised rates at the end of 2015. The central bank said, as expected, that it will soon start trimming the $US4.5 trillion balance sheet it built up after the recession. It left interest rates unchanged in a range of 1% to 1.25%.

As for the other news in FX, here was the scoreboard at 8:31 a.m. ET:

  • The Japanese yen is down by 0.2% at 112.42 per dollar after the Bank of Japan held policy on hold. With an 8-to-1 vote, the central bank kept interest rates, asset purchases, and its assessment on the Japanese economy unchanged from July.
  • The euro is little changed at 1.1909 against the dollar.
  • The British pound is little changed at 1.3495 against the dollar.

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