Dollar Rallies After Fed Hikes Rates for First Time Since 2006

The Federal Reserve performed a long-anticipated interest rate hike on Wednesday. While the dollar had a confusing reaction to the announcement at first, it rallied by the end of trading session and continued to move up during the start of the Thursday’s trading session.

The Fed raised its benchmark interest rate by a quarter of a percentage point to 0.5 percent on Wednesday, performing the first hike in almost a decade. Yet the dollar was not sure how to react to the news, rising after the event yet falling back almost immediately before resuming the rally after a while.

Market analysts had different explanations for such behavior of the US currency. Some said that the rate hike was simply priced in already. Others argued that it is surprising that the Fed decided to start monetary tightening while the economic forecasts remained the same, meaning that inflation is not expected to reach the target level of 2 percent until 2018.

EUR/USD dropped from 1.0911 to 1.0871 as of 00:49 GMT today. GBP/USD declined from 1.4998 to 1.4976. USD/JPY advanced from 122.20 to 122.49.

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