#FedRateCutAffectsDollarTrend When the Federal Reserve cuts interest rates, it generally weakens the U.S. dollar. Here’s how: 1. Lower Interest Rates Reduce Dollar Demand • Lower rates make U.S. assets (like bonds) less attractive to investors seeking higher yields. • This leads to capital outflows, reducing demand for the dollar. 2. Inflation Expectations Can Rise • Rate cuts are often meant to stimulate economic activity, which can lead to higher inflation. • If inflation rises faster than interest rates, the dollar’s purchasing power weakens. 3. Increased Money Supply • Lower rates make borrowing cheaper, increasing the supply of dollars in the economy. • More dollars in circulation can reduce the currency’s value. 4. Stock Market and Risk Appetite • A weaker dollar can boost U.S. stock prices, as multinational companies benefit from foreign revenues. • If investors shift to riskier assets (like emerging markets), demand for the dollar may fall further. Exceptions & Other Factors • If the Fed cuts rates while other central banks are also easing, the dollar might not weaken significantly. • If global uncertainty rises, the dollar could still strengthen as a safe-haven currency. Would you like insights on how this might affect specific sectors or markets?