SMU Currency Analysis: Dollar Weakens in Last Three Months

One of the primary drivers of currency change is interest rate differential between currency pairs. The March 20 announcement by the Federal Reserve will take some of the steam out of dollar appreciation that occurred last year.

On March 21, the Associated Press wrote, “The Federal Reserve left its key interest rate unchanged March 20 and projected no rate hikes this year, reflecting a dimmer view of the economy as growth weakens in the United States and abroad. In signaling no rate increases for 2019, the Fed’s policymakers reduced their forecast from two that were previously predicted in December. They now project one rate hike in 2020 and none in 2021. The Fed had raised rates four times last year and a total of nine times since 2015. The central bank’s theme Wednesday, in its statement and in a news conference by Chairman Jerome Powell, is that it will remain continually ‘patient’ about pursuing any further rate hikes.”