US Dollar Strengthens to Trade at Three-Month High Over Powell’s Comments
Early on Friday, the US dollar is trading strong, holding close to the highest levels seen in three months after Fed chair Jerome Powell maintained his dovish and cautious outlook about economic recovery. At the time of writing, the US dollar index DXY is trading around 91.98.
Powell also dismissed concerns about the volatility in bond yields amid concerns of higher inflation, driving the highest spike seen in the dollar since a month. According to him, the sharp sell-off in US Treasuries is unlikely to push bond yields high enough for the Fed to intervene or control.
Additional bullishness in the US dollar was also driven by the market sentiment turning risk-off, causing investors to sell off equities and riskier currencies, especially commodity currencies like the AUD and the NZD. Meanwhile, the Euro dipped to the lowest level seen in a month against the greenback.
Higher US Treasury yields offer more support to the dollar, keeping it bullish for now. However, analysts maintain a bearish outlook for the reserve currency going forward on the back of vaccine rollout boosting economic recovery and increasing the risk appetite while additional fiscal stimulus measures in the US could also exert downward pressure.
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