Dollar gains as Powell avoids committing to a December rate cut

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The dollar rose after Federal Reserve Chair Jerome Powell said it’s not certain that the central bank will cut interest rates again at its next meeting in December.

The Bloomberg Dollar Spot Index rose as much as 0.4%, its biggest advance since Oct. 9 as his comments pushed bond yields higher. The Swiss franc and the British pound led the declines.

“The dollar rallied sharply on Powell’s comment that a December cut is not a foregone conclusion,” Bank of America Corp. strategist Alex Cohen said. “This was a bit more guidance that the market was expecting and pushed against December pricing, which was nearly fully priced.”

Policymakers on Wednesday made a quarter-point cut to their benchmark rate to a range of 3.75%-4%, as widely expected.

The ongoing federal government shutdown has delayed a lot of economics reports, making it hard to gauge the health of the labor market and the economy and adding to the uncertain outlook facing the Fed.

Powell has characterized the Fed’s recent cuts as protective measures to ensure that the economy continues to grow. Last year, the Fed started cutting rates only to stop and remain on hold until September as the economy and inflation continued to surprise to the upside.

“Continued characterization of the cut as precautionary or a risk management measure, will help the dollar on the margin,” said Jayati Bharadwaj, a strategist at TD Securities.