Euro Hits Multi-week Highs as Dollar Softens after Fed Signals Gradual Rate Hikes

The euro took off to five-week highs versus the dollar on Thursday as political uncertainties in Europe was reduced after Netherlands’ Prime Minister Mark Rutte’s party took lead in Wednesday election. Meanwhile, the greenback plunged steeply after Fed raised rate but signaled no pick-up in the pace of tightening.

The euro got a boost as investors were relieved after fears that public opinion was swinging inexorably toward a break-up of the union. Votes counted so far showed the anti-EU party of Geert Wilders won fewer seats than expected in Dutch elections.

On the other hand, dollar lost ground versus most of its peers even after the Federal Reserve hiked interest rates by 25 basis points to a range of 0.75 percent to 1.00 percent. This was the second rate hike in three months, a move supported by steady economic growth, strong job gains and prospect that inflation is heading towards the central bank’s target goal.

However, Fed did not signal any plan to accelerate the pace of monetary tightening with Fed Chair Janet Yellen emphasizing that future rate increases would be “gradual.”

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