The U.S. dollar strengthened on Thursday after Federal Reserve Chair Jerome Powell avoided confirming whether another interest rate cut would come in December, fueling investor uncertainty and lifting bond yields.
The Bloomberg Dollar Spot Index gained as much as 0.4%, marking its biggest rise since October 9. The Swiss franc and British pound were among the major currencies to weaken against the greenback.
“The dollar rallied sharply on Powell’s comment that a December cut is not a foregone conclusion,” said Alex Cohen, strategist at Bank of America Corp. “This provided more clarity than markets anticipated and challenged expectations of a fully priced-in December cut.”
As expected, the Fed reduced its benchmark rate by a quarter point to 3.75%-4%, continuing its cautious easing cycle. However, the ongoing U.S. government shutdown has disrupted key economic data releases, leaving policymakers with limited visibility on labor and growth indicators.
Powell described recent rate adjustments as “precautionary measures” aimed at sustaining economic momentum rather than responding to immediate weakness. Analysts say this stance could continue to support the dollar, especially if inflation and growth remain resilient.
“Characterizing the cut as a risk management move rather than a reaction to data weakness gives the dollar a marginal edge,” said Jayati Bharadwaj, strategist at TD Securities.
With the Fed taking a data-dependent approach and markets recalibrating expectations, traders are now watching the next batch of inflation and jobs data closely — if and when it becomes available.