Dollar Extends Drop As Fed Leads Global Pivot To Monetary Easing

(Bloomberg) -- The dollar was on pace for its biggest two-day decline since July as investors continue to adjust to the new outlook for US interest rates after Wednesday’s Federal Reserve meeting.

The Bloomberg Dollar Spot Index fell as much as 0.8% to the lowest level since August. That followed a 0.8% drop after Fed policy makers said they’ve begun to contemplate the timing of interest-rate cuts. The euro and the pound gained more than 1% against the greenback Thursday after their central banks kept rates unchanged. The onshore Chinese renminbi also climbed nearly 1%.

Fed officials released new quarterly forecasts that anticipate a sharper drop in their target for the federal funds rate next year than in September. That spurred traders to ramp up wagers on rate cuts, sending waves through global financial markets. 

While the Fed is spearheading the global pivot toward easing monetary conditions, Norway raised rates for what the central bank said would likely be the last time. The surprise move fueled a 2.8% advance for the krone against the dollar, leading gains for all Group-of-10 currencies versus the greenback Thursday.

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