We have been told that a more restrictive monetary policy isn’t happening yet. Consequently, the U.S. Dollar performed poorly today against many of its competitors, and this was not made any better by the remarks of Chairman Powell.
The primary measurement index for the USD clocked the dollar in at 91.775 in early Asian trading, which is slightly down from a high it had experienced earlier in the month.
The dismal outlook of the dollar, caused by comments and sentiments concerning inflation over the past two days, reached a pitch today as it suffered a loss of about a third.
Before daybreak, both Chairman Powell and New York Federal President John Williams made remarks that the economic recovery needs time before a tapering of stimulus and higher borrowing costs will be warranted.
“Latest smoke signals from the Fed … all point to September as the meeting when the Fed is, on current trends, most likely to declare that substantial further progress towards their goals has been achieved, or is being achieved,” Ray Attrill, head of foreign-exchange strategy at National Australia Bank in Sydney, had written today, reported by MetaNews.
“Their comments have seen markets row back somewhat from their largely position-driven convulsions last week.”
The euro, however, did not change all that much on Wednesday, coming in at $1.19340, after recovering from a low of $1.18470 which had plagued it last week.
The Aussie currency, often seen as a proxy for risk sentiment, was more or less muted at $0.7546, up from a recent low of $0.7478.
“We will not raise interest rates pre-emptively because we fear the possible onset of inflation,” Powell stated yesterday in a hearing before a U.S. House of Representatives panel. “We will wait for evidence of actual inflation or other imbalances.” After all, We have been told that a more restrictive monetary policy isn’t happening yet.