MAXCO FUTURES – The U.S. dollar surged to a two-week high on Thursday morning in Asia after Federal Reserve Chair Jerome Powell delivered remarks that were more hawkish than expected, despite the central bank’s recent 25-basis-point rate cut.
The U.S. Dollar Index (DXY) closed up 0.62% to around 106.40, driven by a spike in U.S. Treasury yields after Powell emphasized that another rate cut in December is “not a done deal.” His firmer tone dampened market expectations for a series of aggressive easing moves through the end of the year.
“We will continue to make decisions based on data, not the calendar,” Powell said, stressing the need for caution as inflation has yet to fall back to the 2% target.
Market Reaction
- The hawkish tone immediately lifted the dollar against most major currencies.
- EUR/USD slid to around 1.08, while USD/JPY broke above 151.70 as 10-year Treasury yields climbed past 4.40%.
- Spot gold briefly rose early in the session but later fell below USD 3,930 per ounce, pressured by a stronger dollar and higher-for-longer rate expectations.
- Silver also edged lower, while U.S. stock indexes closed mixed as investors digested Powell’s “hawkish hold” stance rather than a dovish pivot.
Fundamental Factors
Although the Fed cut rates for the second time this year, Powell reiterated that the U.S. economy remains resilient.
Recent data show the labor market is still tight and consumer spending remains solid, even as the housing sector continues to cool.
However, Powell acknowledged external risks, including potential fiscal uncertainty from a possible government shutdown and a slowdown in global growth that could weigh on the U.S. outlook in the coming quarters.
Policy Outlook
Money markets now price in a 65–70% chance of another rate cut at the December FOMC meeting — a notable drop from expectations before Powell’s speech.
This shift reflects growing sentiment that the Fed is not yet ready to fully signal the end of its tightening cycle.
Global investors now await key economic data — including next week’s U.S. jobs report and the PCE inflation reading — to gauge whether the central bank will maintain a cautious stance or turn more dovish.
Cross-Asset Impact
- The Fed’s hawkish message reinforced the dollar’s position as a defensive asset, pressuring other major currencies.
- The euro weakened amid signals that the ECB may move faster on rate cuts given sluggish Eurozone growth.
- The Japanese yen faced renewed pressure as higher U.S. yields widened the rate differential.
- In commodities, a stronger dollar weighed on precious metals, while WTI crude oil remained relatively stable around USD 60 per barrel.
Asia Market Implications
The dollar’s rally could exert additional pressure on emerging-market currencies, including the Indonesian rupiah, which is hovering near IDR 16,700 per USD.
Indonesian government bond yields may rise, while foreign investors could remain cautious toward rupiah-denominated assets.
Powell’s unexpectedly hawkish tone after a rate cut surprised markets, reaffirming that the Fed remains reluctant to signal further easing until inflation is firmly under control.
The dollar has once again become the preferred currency amid global uncertainty — weighing on gold, the euro, and other risk assets.
Ade Yunus, ST WPA
Global Market Strategies