Dollar cuts losses as Powell signals bond cut

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NEW YORK (Reuters) – The dollar cut losses on Friday after Federal Reserve Chairman Jerome Powell said the U.S. central bank is expected to start cutting asset purchases soon, but is not yet expected to increase prices. interest rate.

US dollar bills can be seen in this illustration taken on February 8, 2021. REUTERS / Dado Ruvic / Illustration

Powell said employment is still too low and high inflation will likely decline next year as pressures from the COVID-19 pandemic subside, although many market participants fear the rise. price pressure lasts longer than policymakers realize.

Investors have taken profits since the dollar index hit a year-long high last week, when fears that inflation will remain stubbornly high for longer led investors to anticipate when the Fed will raise its prices. rate for the first time until mid-2022.

Now, “there’s a bit of loosening in positioning, we’ve obviously seen a stronger dollar since the Fed in September,” said Mazen Issa, senior currency strategist at TD Securities in New York. “It also matches the dollar’s seasonal tendency to ease through the end of the month.”

The Fed said at its September meeting that it would likely start cutting its monthly bond purchases as early as November, and signaled that interest rate hikes could follow sooner than expected.

The dollar index fell 0.10% to 93.64, and is down from a one-year high of 94.56 last week. The euro gained 0.09% to $ 1.1636.

Data from Friday showed that business activity in the United States rose sharply in October, suggesting that economic growth picked up at the start of the fourth quarter as COVID-19 infections eased, although that labor and raw material shortages have hampered manufacturing.

The dollar rally has also faded as investors expect faster rate hikes in other currencies.

Issa, however, expects the dollar to regain strength, as global central banks oppose aggressive rate hikes revisions, while the Fed is expected to remain relatively hawkish and move forward with a cut. of its bond purchase program.

“Once we get the pullback from other central banks and the Fed has made a commitment to gradually cut back, we should see really shallow dollar declines,” Issa said. The Australian dollar, which is a proxy for risk appetite, gave up on earlier gains and lost 0.05% for the last time to $ 0.7462.

The yen, a safe haven, appreciated, although it remains the worst performing, having fallen by nearly 10% this year. The dollar lost 0.50% for the last time against the Japanese currency at 113.42 yen.

Bitcoin fell 2.98% to $ 60,367. The cryptocurrency hit a record high of $ 67,017 on Wednesday, after the launch of the first exchange-traded fund to buy U.S. bitcoin futures.

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Price of currency offers at 3:03 p.m. (1903 GMT)

Description RIC Last closure US Pct Change YTD Pct High Bid Low Bid

Previous modification

Session

Dollar index 93.6380 93.7410 -0.10% 4.064% +93.7890 +93.5340

Euro / Dollar $ 1.1636 $ 1.1625 + 0.09% -4.76% + $ 1.1656 + $ 1.1621

Dollar / Yen 113.4200 114.0200 -0.50% + 9.84% +114.2000 +113.4400

Euro / yen 131.97 132.50 -0.40% + 3.98% +132.7900 +131.9300

Dollar / Switzerland 0.9162 0.9184 -0.24% + 3.56% +0.9185 +0.9152

Sterling / Dollar $ 1.3754 $ 1.3792 -0.27% + 0.68% +1.3815 $ +1.3736

Dollar / Canadian 1.2370 1.2371 + 0.00% -2.85% +1.2390 +1.2321

Aussie / Dollar $ 0.7462 $ 0.7466 -0.05% -2.99% + $ 0.7512 + $ 0.7454

Euro / Switzerland 1.0660 1.0673 -0.12% -1.36% +1.0682 +1.0659

Euro / Sterling 0.8458 0.8423 + 0.42% -5.36% +0.8468 +0.8422

NZ $ 0.7142 $ 0.7157 -0.17% -0.51% + $ 0.7188 + $ 0.7133

Dollar / Dollar

Dollar / Norway 8.3595 8.3690 -0.14% -2.68% +8.3790 +8.3235

Euro / Norway 9.7295 9.7145 + 0.15% -7.05% +9.7452 +9.6890

Dollar / Sweden 8.5751 8.6029 -0.19% + 4.62% +8.6145 +8.5615

Euro / Sweden 9.9781 9.9973 -0.19% -0.98% + 10.0050 +9.9712

Reporting by Karen Brettell; Editing by Susan Fenton and Jonathan Oatis


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