Dollar Eases from Record High after Powell’s Renomination

Dollar Falls

On Tuesday, the US dollar eased from its new 16-month high after the renomination of Federal Reserve Chair Jerome Powell. 

As of writing, the US dollar index, which tracks the greenback against a basket of its six rival currencies, lowered 0.17% to 96.38. 

Subsequently, it bounces down from its peak of 96.60 during the Asian trading hours today. 

Moreover, the second designation of Chair Powell fueled market expectations on interest rate hikes, boosting the dollar in early trading. 

Accordingly, President Joe Biden made the announcement yesterday. This trailed weeks of speculations that a push from progressives might place Fed Governor Lael Brainard to the spot. 

Consequently, Biden explained that the appointment of Powell was because of the current economic circumstances. 

He further highlighted the enormous persisting uncertainty that requires stability and independence.

In line with this, the US government bond yields climbed across the board. For instance, the two-year US Treasury yields reached 0.64%, the highest level since early March 2020. 

Meanwhile, markets now kept an eye close to the timeline that Fed will follow as it unwinds its massive policy support.

The American central bank already started paring back the bond purchases, involving reductions of $15 billion per month. 

However, at present, the majority of Fed officials do not consider raising rates at least until the bond-buying taper winds down. 

Subsequently, experts anticipated the program to conclude in late spring or early summer 2022.

Nevertheless, traders looked forward to a faster rate timeline as they priced in the initial hike by June 2022.

Meanwhile, the dollar declined 0.05% to 114.80 against the yen, reversing its 4-month high of 115.15. 

Conversely, the Australian dollar shed 0.06% to 0.72 as the New Zealand dollar tumbled 0.47% to 0.69.

Euro Up as Dollar Eases

Furthermore, the euro gained 0.17% to 1.13 against the dollar, rebounding from its 16-month low of 1.12. 

Correspondingly, experts noted that the eurozone inflation could turn swiftly lower in 2022 than the inflation in the US. 

However, the current renewed lockdowns and pressure on the service sector in Europe gave more reasons for the ECB to lag on its monetary policy. 

At the same time, the Canadian dollar gained 0.35% to 1.27 as the Singaporean dollar rose 0.21% to 1.37. 

Similarly, the Chinese yuan rose 0.07% to 6.39 as the People’s Bank of China signalled monetary easing. 

Regardless, investors believed that this only had limited impact, raising speculation that the Chinese central bank could cut rates in the near term. 

Conversely, the Pound sterling lost 0.25% to 1.34 as the Swiss franc curtailed 0.12% to 0.93.

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