US Dollar Exhibiting Mixed Trading – Fed Officials’ Comments on Inflation in Focus
The US dollar starts the day on a somewhat shaky footing as uncertainty creeps in yet on the issue of inflation, sending the reserve
Early on Thursday, the US dollar starts the day on a somewhat shaky footing as uncertainty creeps in yet on the issue of inflation, sending the reserve currency close to the lowest level seen in nearly three months. At the time of writing, the US dollar index DXY is trading around 91.76.
Although the DXY has posted a slight recovery from its dip in the previous session, it remains well below the high seen last week. The weakness was driven by recent statements from Fed officials – on the one hand, Fed chair Powell maintains the effect of price rises to be transitory, while on the other, Atlanta Fed President Raphael Bostic commented that inflation could overshoot the central bank’s target this year, driving the need for a rate hike as soon as next year.
Bostic also added that the price rises seen lately could be temporary but their effects could last for a longer time on the economy than the Fed’s expectations. His comments were also echoed by Fed Governor Michelle Bowman and sent investors into a confused state regarding the Fed’s potential timeline for withdrawing monetary stimulus measures, keeping the US dollar under some pressure.
During the past week, the greenback had strengthened by over 2% after the FOMC hinted at sooner than expected tightening of policy as the economic recovery gathers pace. However, some of those gains were erased at the beginning of this week when Powell played down the hawkish mood in his congressional testimony.
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