Dollar Strengthens after Powell's Comments

10 Jul 2024 , 09:56 AM

The dollar rose from a three-week low on Wednesday as Federal Reserve Chair Jerome Powell expressed caution about the timing of interest rate cuts in the United States.

The New Zealand dollar fell as the central bank voiced confidence that inflation would return to its target range this year, prompting speculation about early policy easing.

Powell said on his first day of testimony to Congress that a rate cut is not appropriate until the Fed has “greater confidence” that inflation is on track to meet the 2% target.

He did, however, mention the cooling job market. “We now face two-sided risks” and cannot rely exclusively on inflation, he warned.

The dollar index, which compares the US currency to six major peers, including the euro and the yen, was steady at 105.14 after climbing 0.1% on Tuesday. It fell to its lowest level since June 13 on Monday, following unexpectedly disappointing payrolls data from the United States.

Traders presently expect a rate decrease by September, down from 76% a day earlier. By December, a second reduction is almost fully factored in.

Powell is set to speak before the House later in the day after his Senate hearing. CPI numbers for June are due on Thursday.

The dollar gained 0.13% to 161.525 yen. The euro remained unchanged at $1.0815.

New Zealand’s kiwi fell 0.55% to $0.60915, moving further away from Monday’s three-week high of $0.6171.

The Australian dollar rose 0.5% versus its rival, reaching NZ$1.1065 for the first time since February 2023.

The Reserve Bank of New Zealand held interest rates constant, as expected, but expressed confidence that inflation will return to target in the second half of the year. At the last meeting in May, policymakers hinted at the possibility of another rate hike.

Australia’s dollar fell 0.1% to $0.67345, but it remained near to Monday’s six-month high of $0.67615.

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