FOREX-Dollar Slides After Powell Signs To Tighten, Holds Rate Hikes
By Herbert Lash
NEW YORK, August 27 (Reuters) – The dollar slipped on Friday after the market perceived a much-anticipated speech by Federal Reserve Chairman Jerome Powell as accommodating, even though he indicated that the reduction in massive U.S. central bank support to the economy could begin. by the end of the year.
Powell said there had been clear progress towards maximum employment and he was of the opinion that if the US economy developed broadly as expected, “it might be appropriate to start reducing the pace of asset purchases this year. year”.
But Powell told the Fed’s annual Jackson Hole symposium that the timing and pace of the cut shouldn’t be taken as a signal when interest rates will start to rise, a message the market has perceived to be. accommodating because it will keep credit cheap.
The speech showed that Powell was ultimately committed to a reduction schedule, but failed to take the hawkish stance of some Fed officials, said Gregory Anderson, global head of currency 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 0.42% to 92.6540.
The euro EUR = EBS rose 0.39% to $ 1.1797, while the yen JPY = rose 0.23% to $ 109.8200.
Following the release of the minutes of the Fed’s July meeting last week, the dollar rose as most participants anticipated the reduction would start 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.
Powell wanted to make sure the market didn’t expect the start of the cut to mean the start of a Fed tightening cycle, Petrosinelli said. “He was very clear in demarcating that.”
The dollar fell as market participants 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.
“Powell drops a hammer in the middle of the interest rate curve and forces traders to seek returns in foreign markets,” Schamotta said.
The dollar began to retreat 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 the program end at first. quarter of next year.[nS0N2O301G}[nS0N2O301G}[nS0N2O301G}[nS0N2O301G}
Benchmark yields on 10-year treasury bills US10YT = RR fell 2.5 basis points to trade at 1.3188%, after jumping to 1.375%, the highest since August 12, Thursday following bullish comments from another regional Fed chairman .
Overnight, the safe haven dollar gained some support after Thursday’s suicide bombing at Kabul airport.
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 fell 0.57% to 1.2612 against the US dollar.
Auction price in currency at 12:40 p.m. (4:40 p.m. GMT)
US Close previous session
Percentage change for the current year
EUR = EBS
Dollar / Yen
JPY = EBS
Euro / yen
Dollar / Switzerland
CHF = EBS
Pound sterling / dollar
GBP = D3
CAD = D3
Australia / Dollar
AUD = D3
+ $ 0.7316
+ $ 0.7222
Euro / Switzerland
Euro / Pound
New Zealand dollar / Dollar
NZD = D3
+ $ 0.7016
+ $ 0.6934
Dollar / Norway
NOK = D3
Euro / Norway
Dollar / Sweden
Euro / Sweden
Global exchange rates https://tmsnrt.rs/2RBWI5E
(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 and David Holmes)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.