Reuters, New York, August 27-The U.S. dollar fell on Friday after the Federal Reserve Chairman Powell hinted in a highly anticipated speech that the Fed may begin to reduce large-scale support before the end of the year, unlike the market It was as early as many people thought.
Powell said that significant progress has been made in achieving full employment. He believes that if the U.S. economy improves as expected, “it may be appropriate to start slowing down the pace of asset purchases this year.”
However, Powell stated at the Fed’s Jackson Hole annual seminar that the timing and pace of the cut should not be interpreted as a signal of when interest rates will begin to rise. Gregory Anderson, global head of foreign exchange strategy at Bank of Montreal Capital Markets, said that his speech showed that Powell did not take the hawkish stance that some Fed officials did.
He said, “Obviously, if you were worried about the timetable before, that is, when the reduction was announced in September and the action started on October 1, then today’s speech did not mention this.”
“Based on the most extreme hawkish views, today’s speech is not as bad as feared,” he added.
The dollar index fell 0.39% to 92.6760.
Euro to U.S. DollarEUR=EBSRose 0.37% to 1.1794 US dollars, the yen against the US dollarJPY=It fell 0.24% to 109.8200 yen.
After the Fed’s July policy meeting minutes were released last week, the U.S. dollar has risen because most market participants expect to begin to reduce quantitative easing this year.
Powell clearly wants to separate quantitative easing from “rate hikes,” said David Petrosinelli, senior trader at Insperex, “He stated this very clearly.”
Karl Schamotta, director of the global product and market strategy department of Cambridge Global Payments, said that the dollar fell because market participants significantly reduced their expectations for the Fed’s long-term policy tightening trajectory.
About 15 minutes before Powell’s speech, the dollar began to fall. Earlier, St. Louis Federal Reserve Bank President Brad reiterated his hawkish view that he hoped that the Fed would start reducing its asset purchase plan as soon as possible and complete the reduction before the first quarter of next year.
The yield on the benchmark 10-year U.S. Treasury fell 3.4% to 1.3104%. It jumped to 1.375% on Thursday, the highest since August 12.
New Zealand Dollar to U.S. DollarNZD = D4It fell slightly after Prime Minister Ardern of New Zealand announced that Auckland, the country’s largest city, may continue to blockade for two weeks.
Swedish Krona to U.S. DollarSEK = D3It was flat at 8.7070 Swedish kronor, and the previously announced economic data was mixed.
Canadian dollar to U.S. dollarCAD=D3It rose 0.56% to 1.2612 Canadian dollars. Brent crude oil futures rose 1.63 US dollars to settle at 72.70 US dollars per barrel, a sharp increase of 11.5% this week.
Marc Chandler, managing director of BK Asset Management, said that the trend of the Canadian dollar is usually affected by oil, risk sentiment represented by the S&P 500 index, and interest rate differentials.
He said, “Today’s strength in the Canadian dollar is not greatly affected by the Canadian situation, but reflects the situation in the United States and the market’s interpretation of Powell’s speech.” (End)
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