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The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a negative note near 98.55 during the Asian trading hours on Thursday. The DXY extends the decline after the US Federal Reserve (Fed) delivered a rate cut at its December policy meeting. 

As widely expected, the Fed cut its benchmark interest rate by 25 basis points (bps) to a target range of 3.50% to 3.75% at its December policy meeting on Wednesday, the third consecutive reduction since September. Fed Chair Jerome Powell emphasized that the US central bank is now "well positioned to wait and see how the economy evolves" and noted that a future rate hike is not a base-case scenario. 

In their latest economic projections, Fed officials penciled in just one rate reduction next year, unchanged from their estimate in September. However, their latest policy statement suggests they’re leaning toward staying on hold in the near term. The DXY weakens as the Fed delivered an outlook that was less hawkish than expected. 

Markets are currently pricing in nearly a 78% odds that the Fed will hold interest rates steady next month, compared with a 70% chance just before the rate cut announcement, according to the CME FedWatch tool.

The US weekly Initial Jobless Claims report will be in the spotlight later on Thursday. Analysts expect the number of Americans filing new applications for unemployment benefits to rise to 220,000, compared to 191,000 in the previous reading. However, if the report shows a stronger-than-expected outcome, this could help limit the USD’s losses in the near term. 

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