AUD Tumbles as Fed Hikes Rates and Signals Further Tightening
The Australian Dollar (AUD) plummeted against the US Dollar following the Federal Reserve's decision to raise interest rates by 25 basis points. The rate hike was widely anticipated, but it still had a significant impact on the currency market.
The AUD/USD pair slid nearly 20 pips in the immediate reaction and traded around 0.7113 at the time of writing. This decline came despite the fact that the quarter-point rate hike was already largely priced in by traders.
The Federal Reserve raised its federal funds target range to 3.75%-4.00% in a unanimous 12-0 decision, marking its first rate increase since July 2023. The US Dollar Index (DXY) extended its gains toward the psychological 100.00 mark following the announcement.
The updated dot plot showed that 16 of 18 Fed officials expect at least one more rate hike this year, with 12 policymakers projecting one additional quarter-point increase and four expecting two more hikes. The median year-end rate projection rose to 4.1% from 3.8% in June.