The dollar falls in the world after Fed announcements: why it is good news for Javier Milei

He dollar in the world falls this Thursday to four month minimum After the Federal Reserve would indicate that its cycle of increases in interest rates has ended and that in 2024 borrowing costs will be reduced.

The president of the Fed, Jerome Powell stated that it is likely thatThe historic tightening of monetary policy has come to an end, with a debate on borrowing cost cuts “in sight”. The authorities were almost unanimous in their projections that borrowing costs They will fall in 2024.

“Every Fed communication vehicle – Powell’s statement, bullet points and press conference – was unequivocally cautious,” said Blake Gwinn, a strategist at RBC. “This change was perhaps most obvious when “Powell admitted that the committee discussed the timing of the cuts at the meeting.”

He dollar indexwhich compares the greenback with a basket of six prominent currencies, declined to 102.42 units, its lowest since mid-August. The latest drop was 0.3%, to 102.57.

He Swiss National Bank The intense day of announcements by the European central banks began, keeping rates at 1.75%, as expected. The franc weakened against the euro, but appreciated slightly against the dollar after the announcement, as the entity acknowledged that inflationary pressure decreased somewhat in the last quarter.

For its part, the The Norwegian crown rose against the euro and the dollar after the Bank of Norway unexpectedly raised rates by 25 basis points to 4.5%, adding that they would likely remain at that level for some time.

He and in It continued to strengthen after the fall of the greenback and reached its highest level since July 31, at 140.95 units. In its last operations it gained 0.9%, to 141.58 yen.

Weak dollar: How does it impact Argentina?

This is key information for emerging markets in general and for Argentina in particular. Because the market was speculating about a rate cut, this expectation caused a strong fall in the yields of American treasury bonds.

All tranches moved down and since rates move opposite to bond prices, this implied strong increases in bond prices globally.

This is vital for emerging markets, which They tend to benefit from low rates due to its need for financing in the capital market.

Therefore, if the rate falls in the US, financing becomes cheaper and they can boost their growth.

In addition, a drop in rates in the US also usually brings with it a fall in the dollar, which also benefits emerging markets since the currencies of emerging countries tend to strengthen.

This whole panorama could be positive for the Milei Government and for the local debt. If the market speculates with a Fed rate cut It is expected that US rates will also drop and this will cause a reduction in country risk.

If country risk decreases, it becomes easier for Argentina to return to global markets to roll its debt into dollars. Additionally, a decrease in country risk could push up the price of local bonds.