The Swiss franc weakened after the Swiss National Bank lowered its policy rate to 0.25%, while the Swedish krona was soft after its central bank maintained its interest rate.
The euro was 0.46% lower against the dollar at US$1.0852 after US policymakers, on Wednesday, held interest rates steady and signalled two quarter-point interest rate cuts for later this year, the same median forecast as three months ago.
“We’re not going to be in any hurry to move,” Fed chair Jerome Powell said.
Powell’s comments and the Fed statement underscored the challenge faced by policymakers as they navigate President Donald Trump’s plans to levy duties on imports from US trading partners and the impact on the economy.
Data on Thursday showed the number of Americans filing new applications for unemployment benefits increased slightly last week, suggesting the labour market remained stable in March.
Recent US data have helped temper worries over slowing US growth that prompted the dollar to sag as much as 7% against the euro since mid-January, Jayati Bharadwaj, a global FX strategist at TD Securities, said.
“A lot of the bad news was already priced in, but none of the hard data is collapsing the way markets were fearing it would, and even the Fed is not indicating to you that they’re in a hurry to ease rates again,” she said.
“All of that is leading markets to reassess some of the bearishness that they have been pricing into the dollar,” Bharadwaj, who expects the dollar to strengthen in the near term, said.
Traders are pricing in about 63 basis points of Fed easing this year, LSEG data showed.
With President Donald Trump still expected to implement new reciprocal tariff rates against major trading partners on April 2, investors were skittish about pressing bearish bets on the dollar.
On Thursday, strategists at Morgan Stanley recommended investors close their long EUR/USD and GBP/USD positions ahead of the April 2 deadline.
“We think that it is better to consider re-entering USD shorts at more attractive levels rather than holding the positions here,” they wrote in a note.
Europe’s central bank bonanza
The dollar’s broad strength weighed on the pound though the British currency pared some losses briefly after the Bank of England held interest rates at 4.5% and warned against assumptions that they would be cut over its next few meetings as it grappled with deep uncertainty hanging over the British and world economies.
With UK inflation stuck firmly above its 2% target, the BOE has cut borrowing costs by less than the European Central Bank and the Fed since last summer, contributing to the country’s sluggish growth rate.
Sterling had earlier risen to a more than four-month high of US$1.3015 in early Asian hours before retreating to trade down 0.3% on the day at US$1.29665.
In a busy day for central banks, the Swiss franc fell 0.5% against the dollar after the Swiss National Bank cut its main interest rate to just above zero and flagged increased uncertainty over the global impact of US President Donald Trump’s trade policies.
Sweden’s central bank meanwhile kept its policy rate at 2.25%, as expected, pushing the krona 0.2% lower against the dollar.
The yen was a shade weaker at 148.79 per dollar, a day after the Bank of Japan held rates and warned of heightening global economic uncertainty, suggesting the timing of further hikes will depend on the fallout from US tariffs.
The Australian dollar was 0.9% lower at US$0.6303 after Australian employment unexpectedly fell in February, ending a strong run of impressive gains, as the red-hot labor market loosened a little, although the jobless rate remained steady.
The New Zealand dollar dropped 0.9% to US$0.5758 even as data showed the economy crawled out of a recession and grew at a faster-than-expected pace of 0.7% last quarter, although underlying details were soft.
Bitcoin, the world’s largest cryptocurrency by market cap, was down about 1.5% on the day at US$84,056.