Global Currency Shifts Amid Fed's Rate Maneuvers

The U.S. dollar saw a significant increase on Thursday following a substantial drop to its lowest in over three years and a subsequent rebound. This came as traders assessed the implications of the Federal Reserve's cautious approach to further interest rate cuts. Meanwhile, New Zealand's currency declined after economic data indicated a greater-than-expected contraction in the country's economy in the second quarter, fueling speculation about deeper rate cuts this year. Similarly, the Australian dollar weakened due to an unexpected decrease in employment figures in August.

The Federal Reserve executed a quarter-point rate cut on Wednesday, maintaining an approach that suggests a steady reduction in borrowing costs throughout the year. Fed Chair Jerome Powell described this policy action as a 'risk-management cut,' aimed at tackling the weakening labor market, yet emphasized that the central bank would not hastily pursue further easing. The U.S. dollar plummeted to a low of 96.224 against a basket of major peers post-rate decision but rebounded to 97.074, continuing its upward trajectory by Thursday to 97.163.

Attention also turned to global currencies, with the euro slipping, sterling easing slightly before the Bank of England's anticipated policy announcement, and the yen faltering ahead of the Bank of Japan's decision. The New Zealand dollar hit a new low, impacted further by GDP data, whereas the Aussie dollar fell following unfavorable employment reports. The Bank of Canada reduced rates, emphasizing the soft jobs market and diminished inflation worries.

(With inputs from agencies.)