FOREX-Dollar rises after Fed cuts rates, signals move is one-off

(Recasts; adds analyst quote, updates prices)
By Kate Duguid
NEW YORK, July 31 (Reuters) - The U.S. dollar rose to
two-year highs on Wednesday after Federal Reserve Chair Jerome
Powell, having made the first cut to interest rates since 2008,
signaled the move was not the start of a rate-cutting cycle.
Against the euro EUR , the dollar was its highest since May
2017 at $1.1058, last up 0.8%. The dollar index .DXY , which
measures the currency against a basket of six rivals, also rose
to a two-year high, last up 0.6% to 98.631.
In a widely expected move, the U.S. central bank cut rates
by 25 basis points to shore up the economy against risks
including global weakness. But in the subsequent press
conference, Powell said he viewed the cut as a "mid-cycle policy
adjustment" rather than a broader loosening of monetary policy.
"The Fed signaled that it is going to be data dependent but
markets were priced for a more dovish outlook which the Fed did
not deliver on," said Collin Martin, director of fixed income at
the Schwab Center for Financial Research in New York.
The statement upended expectations of some market
participants who anticipated confirmation of further rate cuts.
A day prior, traders had forecast at 35% chance of three cuts by
the end of the year; on Wednesday afternoon that figure had
fallen to 12%, according to CME Group's FedWatch tool.
"They acknowledged strong labor markets, recent reasonable
signs of moderate growth. It still leaves the playing field wide
open as to what they're going to do in future months," said Tony
Bedikian, head of global markets at Citizens Bank in Boston.
The Fed's policy decision drew dissents from Boston Fed
President Eric Rosengren and Kansas City Fed President Esther
George who argued for leaving rates unchanged in the face of the
current economic expansion, an unemployment rate that is near a
50-year-low, and robust household spending.
The dollar's larger gains against the euro also reflect
market expectations that U.S. assets will benefit if global
central banks follow the Fed in cutting rates. U.S. President Donald Trump is likely to be disappointed the
Fed did not deliver the large rate cut he had demanded. Trump
has repeatedly harangued the central bank and Powell for not
doing enough to help his administration's efforts to boost
economic growth.