FOREX-Dollar Slides After Powell Embraces Cut, Holds Rate Hikes
By Herbert Lash
NEW YORK, August 27 (Reuters) – The dollar slipped on Friday after Federal Reserve Chairman Jerome Powell indicated in a long-awaited speech which the American central bank could start to reduce his massive support for the economy could start by the end of the year, that wasn’t as fast as many in the market had assumed.
Powell said there had been clear progress towards maximum employment and he believed that if the American economy improved as expected, “it may be appropriate to start reducing the pace of asset purchases this year”.
But Powell told the Fed’s annual Jackson Hole symposium that the timing and pace of the cut shouldn’t be interpreter as a signal for when interest rates will start to rise. The speech showed that Powell has not adopted the hawkish stance of some Fed officials, said Gregory Anderson, global head of foreign exchange strategy at BMO Capital Markets.
“It’s pretty clear that if you’re worried about the timing, which we’re announcing in September that we’re going to cut back from October 1, that’s not there in this speech,” Anderson said.
“It’s not as bad as feared based on the most extreme hawk,” he added.
The dollar index = USD, which measures the performance of the greenback against a basket of six major currencies, fell by 00.39% to 92.6760.
The euro EUR = EBS rose 0.37% to $ 1.1794, while the yen JPY = Fto one 0.24% to $ 109.8200.
Following the release of the minutes of the Fed’s July meeting last week, the dollar Advanced because most Marlet participants expected the reduction to begin this year.
Powell was clear in detaching the tapering from “rate take-off,” or rising interest rates, said David Petrosinelli, senior trader at Insperex in New York. “He was very clear in demarcating that.”
The dollar fell as market participants have sharply lowered their expectations for the Fed’s long-term tightening path, said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
The dollar began to fall about 15 minutes before Powell spoke, after James Bullard, chairman of the St. Louis Fed reiterated his hawkish view that tapering should begin soon and end in the first quarter of Canada. next year.[nS0N2O301G}[nS0N2O301G}[nS0N2O301G}[nS0N2O301G}
Benchmark yields on 10-year treasury bills US10YT = RR fell 3.4 basis points to trade at 1.3104%. Yields surged on Thursday at 1.375%, the highest since August 12.
The New Zealand dollar NZD = D4 fell slightly after Prime Minister Jacinda Ardern announced that a lockdown against COVID-19 in Auckland is expected to remain in place for another two weeks.
Swedish crown SEK = D3 was stable at 8.7070 after mixed economic data.
The canadian dollar CAD = D3 rdare 0.56% to 1.2612 against the US dollar. Brent Futures LCOc1, the international benchmark for crude, rose $ 1.63 to $ 72.70 a barrel and gained 11.5% for the week.
Marc Chandler, chief executive of BK Asset Management, said the Canadian currency is generally inspired by oil, risk with the S&P 500 as a proxy and interest rate differentials.
“The strength of the Canadian dollar today is not so much a reflection of Canada, but of what is happening in the United States and the take-out market of Powell’s speech,” Chandler said.
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(Reporting by Herbert Lash; Additional reporting by Karen Brettell and Saqib Ahmed in New York, Joice Alves in London, and Hideyuki Sano and Tomo Uetake in Tokyo; Editing by Dan Grebler, David Holmes and David Gregorio)
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