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Dollar Tumbles Against Major Counterparts After Powell Rules Out Aggressive Rate Hikes

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After staying sluggish in the Asian and European sessions, the U.S. dollar tumbled on Wednesday after the Federal Reserve Chair Jerome Powell ruled out a 75-basis point hike.

The Fed today hiked interest rate by 50 basis points as widely expected, and also said it expects a couple of similar hikes at the upcoming meetings.

Powell indicated the central bank does not plan to raise interest rates as aggressively as some had feared. “A 75 basis point increase is not something that committee is actively considering,” he said. “I think expectations are that we’ll start to see inflation, you know, flattening out.”

The Fed announced that it has decided to raise the target range for the federal funds rate by 50 basis points to 0.75 to 1% and said it anticipates that ongoing increases in the target range will be appropriate.

In addition, the Fed decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1.

On the U.S. economic front, a report from the Institute for Supply Management showed its Services PMI fell to 57.1 in April from 58.3 in March, although a reading above 50 still indicates growth in the sector. The decrease surprised economists, who had expected the index to inch up to 58.5.

A separate report released by payroll processor ADP showed U.S. private sector job growth slowed by more than expected in the month of April. ADP said private sector employment increased by 247,000 jobs in April after jumping by an upwardly revised 479,000 jobs in March.

Economists had expected private sector employment to surge by 395,000 jobs compared to the addition of 455,000 jobs originally reported for the previous month.

A report from the Commerce Department showed U.S. trade deficit widened to $109.8 billion in March from a revised $89.8 billion in February. Economists had expected the deficit to widen to $107.0 billion from the $89.2 billion originally reported for the previous month.

The dollar index dropped to 102.51, losing more than 0.9%.

Against the Euro, the dollar weakened to $1.0629, giving up more than 1%.

The dollar is trading at $1.2634 against Pound Sterling, weakening from $1.2500.

The dollar shed ground against the Japanese currency as well, fetching 129.12 yen a unit, compared with 130.14 yen on Tuesday.

Against the Aussie, the dollar tumbled to 0.7266, losing nearly 2.5%.

The Swiss franc firmed to 0.9722 a dollar, gaining from 0.9787. The dollar weakened against the Loonie as well, sliding to C$1.2740 from C$1.2841.

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