Currencies Latest Market News: US Dollar Slides on Fed Rate Cut Bets
Estimated reading time: 4 minutes
- Significant USD decline driven by anticipated Fed rate cut.
- USD/MYR plummeted to a two-month low.
- Stronger-than-expected retail sales data initially supported the dollar, but rate cut expectations prevailed.
- Global markets show buoyant risk sentiment; gold hits record high.
- Focus on FOMC meeting announcement and future rate cut implications.
Contents
- Currencies Latest Market News: US Dollar Slides on Fed Rate Cut Bets
- Broad-Based USD Weakness Ahead of FOMC Decision
- The Primary Driver of the USD’s Weakness
- What to Watch Next
Broad-Based USD Weakness Ahead of FOMC Decision
Between 21:00 UTC on September 16 and 05:00 UTC on September 17, 2025, the US dollar experienced a significant decline across major and emerging market currency pairs, driven primarily by heightened market expectations of a Federal Reserve rate cut at its upcoming FOMC meeting. This anticipation, coupled with a decline in US Treasury yields, led to a broad-based sell-off in the greenback, impacting key pairs such as EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, NZDUSD, and USD/CNH. The USD/MYR pair was particularly affected, plummeting to a two-month low.
The most dramatic move was seen in the USD/MYR, which dropped 161 pips to 4.2050, representing a decrease of approximately -0.38% from its prior level of ~4.2211. Source This sharp decline reflects the market’s strong conviction that the Fed will cut interest rates, potentially impacting yield differentials and attracting investment away from the dollar. The DXY (US Dollar Index) also felt the pressure, although the impact on constituent pairs like EURUSD, GBPUSD, and AUDUSD was relatively modest.
The Primary Driver of the USD’s Weakness
The primary driver of the USD’s weakness was the overwhelmingly anticipated 25 basis point rate cut at Wednesday’s FOMC meeting. Source Market participants are keenly focused on the forward guidance accompanying the decision, specifically whether the Fed will signal two or three rate cuts for the remainder of 2025. This uncertainty, combined with the already priced-in rate cut, has fueled volatility.
While stronger-than-expected August US retail sales data initially provided some support to the dollar, the dominant narrative of an impending rate cut ultimately overshadowed the positive economic news. Source The anticipation of lower US interest rates led to a decline in US Treasury yields, further contributing to the downward pressure on the dollar. This is evidenced by a general fall across the US yield curve, although precise numeric values for the change in UST 10Y yields were not specified in the available research. Source
What to Watch Next
- The official announcement and details from the FOMC meeting on September 17, 2025.
- The Fed’s forward guidance on future rate cuts and the implications for the dollar’s trajectory.
- Market reactions to the FOMC decision and subsequent adjustments in investor positioning across major and EMFX pairs.
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Frequently Asked Questions
What were the key factors influencing the USD’s decline?
