Dollar Sinks as Fed Cuts Interest Rates Amid Inflation Optimism

The dollar weakened after the Federal Reserve cut interest rates by half a percentage point, expressing confidence that inflation will recede to the 2% annual target. This move impacted the dollar index, which dropped to 100.45, marking its lowest level since July 2023.

The dollar tumbled on Wednesday following the Federal Reserve's decision to cut interest rates by half a percentage point. The move signals greater optimism from the U.S. central bank that inflation will fall to its 2% annual target. The Fed lowered the overnight rate to a range of 4.75%-5.00%.

Policymakers also forecast further reductions, with a half percentage point cut expected by the end of this year, a full percentage point decrease in 2025, and another half-point drop to bring the benchmark rate to 2.75%-3.00% by 2026.

The dollar index declined by 0.46% to 100.45, its lowest since July 2023, while the euro rose 0.46% to $1.1164 and the greenback fell 0.86% against the yen, reaching 141.17 Japanese yen.

(With inputs from agencies.)