The US dollar rose to a three-month high today. Fed Chairman Jerome Powell announced that the agency would continue to raise rates, perhaps even more than before and at a faster pace. This news boosted the dollar. The US dollar index declined 0.05% to 105.57 later in the session. Despite that, it still changed hands near a three-month high of 105.88 hit the day before.
On Wednesday, Powell began his highly anticipated address to Congress. However, today he reiterated his initial message with a more cautious tone. According to the Fed Chairman, the future policy of the central bank depends on the new data. Such a change in his narrative led investors to stop the dollar’s rally.
Consequently, the currency fell from a nearly three-month high that it held against the Japanese yen. Overall, it plunged 0.6%, finally trading at 136.55 yen.
Thierry Wizman, Macquarie’s global FX and rates strategist, said Powell admitted that the new policy decision depends on new data. The latter will show whether the strong economic growth in January was short term or not.
In recent weeks, various US economic data showed that the country was flourishing. However, some of them also pointed to persistent inflation. That’s what prompted the Fed to announce incoming rate hikes.
According to Fed funds futures, there is a 70% chance that the agency will raise rates by 50bp in March. That percentage is higher by almost 9% compared to the reading from a month ago.
How are the euro and sterling trading today?
The common currency was flat on Thursday but rallied from its multi-month lows. The euro changed hands at $1.0555 at last. Meanwhile, the British pound was trading at $1.1845.
The Canadian dollar plunged to a nearly five-month low today, trading at 1.3795 per USD. Meanwhile, the Australian dollar remained under pressure. Still, it managed to rise 0.3% to $0.6612. On Wednesday, Reserve Bank of Australia Governor Philip Lowe declared that the RBA was closer to pausing its tightening policy. He hinted that the end could come in April.
In Asia, the Chinese yuan collapsed. The new data showed that in February, annual consumer price inflation slowed the most in a year. This news caused investors to question the strength of the economic recovery in China. As a result, the offshore yuan fell 0.2% to 6.9803.
On the other hand, emerging market currencies soared. The Philippine peso and Indian rupee gained after ending the previous session in the red.
