Dollar weakens significantly, investors lean towards riskier assets

dollar, value, investor, economy, fed, central bank

The dollar is weakening significantly today. Investors are leaning towards riskier assets. They are betting that the US Federal Reserve (Fed) is done raising interest rates. The Fed left interest rates unchanged at the end of the two-day monetary policy committee meeting on Wednesday. The British central bank made the same decision today.

Dollar Index and Currency Movements

The dollar index, which measures the value of the dollar against a basket of six major world currencies, was down 0.6 percent at around 5:20 p.m. EDT, hovering around 106.25 points. The euro rose half a percent to $1.062 against the dollar. The British pound added a quarter of a percent to the dollar to $1.2180. The euro also rose a quarter of a percent to the pound to 0.8719 pounds.

Central Bank Decisions

The Fed on Wednesday kept the benchmark interest rate in a range of 5.25 percent to 5.50 percent, having last raised it in late July. However, the central bank did not rule out further interest rate rises.

Investor sentiment that the Fed was done raising interest rates brought back risk appetite to the market, whereupon equity markets strengthened, followed by commodity-linked and emerging market currencies.

Bitcoin’s Surge

The Bank of England left its key interest rate on hold at 5.25 per cent today, as expected. It also signalled that it does not expect to cut interest rates in the near future.

The Norwegian central bank also left interest rates unchanged today. But it said it is likely to raise interest rates next month if inflation does not continue to fall.

The world’s biggest cryptocurrency, bitcoin, which is sometimes taken as an indicator of a tilt toward risky assets, climbed to nearly $36,000 (nearly 830,000) in the past 24 hours, the highest since last May. According to specialist server Coindesk, bitcoin has firmed to US$35,938. Around 5:40 p.m. EDT, the cryptocurrency was up 0.6 percent to $34,607.



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