Federal Reserve

Cashin: Post-Fed dollar move may lead to currency war

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The U.S. dollar has fallen sharply since the Federal Reserve lowered its expected number of rate increases, and that may lead to a global currency war, Art Cashin, UBS director of floor operations, said Thursday.

"The Fed has effectively taken the sting out of the dollar; very good for our multinationals, but trading partners are not going to like it," Cashing told CNBC's "Squawk on the Street."

Against a basket of currencies, the dollar has fallen 2 percent since the Fed's announcement.

The dollar was notably volatile against the , moving sharply lower before snapping back, rising a full yen during the U.S. session from a level weaker than 111. However, the greenback weakened once again and was down about 1 percent in late-morning trading.

Traders work on the floor of the New York Stock Exchange.
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"The dollar continues under some real pressure. The Bank of Japan cannot be happy with that. They got negative trade data today. Exports were down for the fifth month in a row. We may be looking at temptations of currency wars breaking out," Cashin said.

On Wednesday, the Fed kept interest rates unchanged, but scaled back the amount of rate hikes it expects to two from four.

Cashin said Thursday the U.S. central bank does not seem comfortable with where things are. "Yellen seems to indicate that they would tolerate more inflation and the risk of higher inflation, if they could get pressure on the wage area to go up," he said.

Robert McTeer, a former Fed official, said "she did the only thing she could."

"They've gotten themselves a quarter-point off the floor, but the economy is still pretty fragile," he said. "She's probably scared to death that the economy will weaken so much that she'll have to reverse course. The best course for her is to be cautious."

— Reuters contributed to this report.

Federal Reserve Board Chair Janet Yellen looks over her papers during a House Financial Services Committee hearing on Capitol Hill, Feb. 10, 2016, in Washington.
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