Federal Reserve rate cuts can have a strong impact on high-yield currencies, which typically offer higher interest rates compared to major reserve currencies like the U.S. dollar (USD), euro (EUR), and yen (JPY). Examples of high-yield currencies include the Australian dollar (AUD), New Zealand dollar (NZD), and emerging market currencies like the Brazilian real (BRL) and South African rand (ZAR). When the Fed cuts rates, the USD weakens, reducing its yield advantage. This often drives capital flows into higher-yielding currencies, as investors seek better returns. As a result, these currencies can appreciate against the dollar. Additionally, lower U.S. interest rates can improve global risk sentiment, boosting demand for riskier assets, including high-yield currencies. This is particularly beneficial for commodity-linked currencies like AUD and CAD, as a weaker USD can lift commodity prices. However, if rate cuts signal economic weakness in the U.S., global growth concerns may emerge, leading to risk aversion. This could cause investors to shift back into safe-haven assets like the USD, JPY, and CHF, potentially limiting gains in high-yield currencies. Traders closely watch interest rate differentials, central bank policies, and risk sentiment to gauge the impact of Fed rate cuts on high-yield currencies.