A day after the US Federal Reserve’s decision to cut rates to a record low of 0.25%, a decline of nearly 10 basis points, and a rise of just over 1 percentage point in the Dow Jones Industrial Average, the dollar rose against a basket of currencies.
US Treasury yields rose, as did the euro, which has been on a tear this week.
The dollar fell 0.8% against the yen, while the greenback gained 0.2%.
The European Central Bank has announced it will be cutting interest rates by 0.1% for its members.
The Bank of England said it will also cut interest rates for the first time since 2010.
On Tuesday, US markets were closed for the holiday, and traders were cautious.
At one point, the Dow gained more than 1,000 points.
The S&P 500 lost almost 2,000.
Meanwhile, the Nasdaq Composite lost almost 5,000, or 3%, as investors weighed the risk of a further slowdown in China.
The Dow fell more than 5,500 points.
A major factor behind the move was the announcement of the Fed’s decision on Monday to cut its benchmark overnight lending rate to record lows.
The rate is currently below zero.
The move was met with a wide range of reactions from economists and market analysts, who said the Fed had acted in an appropriate way.
For one, the Fed cut its key rate to a near-record low, and there was also a strong market reaction.
“We think the Fed has made a very good decision, which is to keep the central bank from engaging in excessive monetary policy in an attempt to help the economy recover from a very hard recession,” said David Rosenberg, chief market strategist at Wells Fargo Securities.
“It is a significant signal that the Fed is taking a very careful look at its policy and will be acting cautiously in the future.”
But analysts warned that it was too soon to tell if the Fed will be able to pull off its new policy of no interest rate cuts, with a weaker global economy still weighing on the US economy.
In the longer term, the Federal Open Market Committee (FOMC) is expected to take another step toward raising interest rates in the coming months, when it is expected in an open meeting on November 13 to decide whether to continue with the Fed rate cut.
But analysts say it is unlikely that the FOMC will act on its mandate, and instead will focus on other monetary policy topics.
“The market reaction to the Fed cutting rates is that they are very, very cautious and it is quite difficult to say if they will be a ‘go-for-broke’ move, or if they can actually move the economy back into a positive mode,” said Jonathan Weiler, chief economic strategist at PNC Financial Services.
“On the one hand, it looks like the Fed took an extraordinary action to protect the economy.
On the other hand, if they continue with their policy of zero interest rates, that will put them in a position where they are more vulnerable to a negative shock from the economy.”