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Dollar holds near seven-week high after Fed damps rate cut hopes

The US dollar held close to a seven-week peak against the euro on Thursday after Federal Reserve Chair Jerome Powell dismissed the prospect of a rate cut as early as March. The dollar index was …

The US dollar held close to a seven-week peak against the euro on Thursday after Federal Reserve Chair Jerome Powell dismissed the prospect of a rate cut as early as March.

The dollar index was up at 103.75, remaining near Monday’s 103.82 high. Sterling held steady ahead of the Bank of England’s policy verdict later in the day.

Powell said on Wednesday that a March cut is “not the base case.” His remarks dashed hopes for an imminent easing after the Fed left rates on hold and dropped language about further hikes.

Traders are now pricing just a 38% chance of a March cut, down from 59% pre-Fed. However, markets still expect around 150 basis points of easing this year.

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The euro slipped to $1.0785, below Wednesday’s $1.0795 trough. Sterling fell to $1.2650 as investors look for BoE rate cut signals.

The dollar recovered losses against the safe-haven yen despite declining US yields. It last traded at 146.93 yen, tending to track long-term rates.

Analysts said regional lender worries sparked a Treasuries rally before the Fed met, driving yields south. But the less-dovish tone from Powell may revive dollar gains.

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