By
Josie Cox
Updated March 19, 2015 1:59 p.m. ET
28 COMMENTS
The dollar bounced back fiercely Thursday after its spectacular fall triggered by hesitant signals from the U.S. Federal Reserve, suggesting that as long as the U.S. is set to be first out of the blocks in raising interest rates, investors’ appetite for dollars will be undimmed.
The euro soared above $1.10 on Wednesday, with the greenback making similar declines against other major and emerging-market currencies after the Fed’s policy statement indicated it intends to proceed cautiously on its first interest rate rise since 2006. Many had expected clearer signaling that the Fed might act as early as June.
But by Thursday afternoon in Europe, the euro was back down to around $1.064, while the buck was also up by more than 0.5% from its overnight low against the yen, at ¥120.80, and up by 1.6% against the Turkish lira, at 2.61.
The scale of the drop in the dollar overnight shocked many investors and analysts. “I was really surprised by the sheer force of the market reaction,” said David Vickers, a multiasset fund manager at Russell Investments. “It’s still very clear that the Fed will act way before the European Central Bank and even the Bank of England, meaning that we still think that the dollar has room to rise, but the market moves were very sharp,” he said.
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