FOREX-Dollar mixed after Powell, pound hits three-year high

"The new fear of inflation - he did try to cap down the worry a little bit," said John Doyle, vice president of dealing and trading at Tempus Inc. But, he added, "I think is going to continue that line about holding rates low for a long time.

Reuters | Washington DC | Updated: 23-02-2021 22:24 IST | Created: 23-02-2021 22:23 IST
FOREX-Dollar mixed after Powell, pound hits three-year high
Representative image Image Credit: ANI

The dollar reversed earlier gains on Tuesday morning after a dovish speech from U.S. Federal Reserve chief Jerome Powell failed to quell inflation fears, while the British pound rose to fresh three-year highs. The growing likelihood that Congress will pass President Joe Biden's $1.9 trillion stimulus plan has raised concerns about a possible spike in inflation. The recent rise in inflation expectations as investors bet on a post-pandemic economic recovery and the so-called "reflation" trade has hurt the dollar this month.

Powell's speech on Tuesday did little to allay inflation fears. In remarks prepared for delivery to a Senate Banking Committee, Powell said, "The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," the hurdle the Fed has set for discussing when it might be appropriate to pare back support. "The new fear of inflation - he did try to cap down the worry a little bit," said John Doyle, vice president of dealing and trading at Tempus Inc.

But, he added, "I think is going to continue that line about holding rates low for a long time. I think he's going to try to continue to be that reassuring voice for markets. Which is why we've seen a little bit of recovery in risk as he started to speak and the dollar dip." The dollar index was last at 90.115, 0.08% higher on the day, but off session highs after the post-Powell dip.

Sterling hit a new nearly three-year high of $1.412 , last up 0.33% on the day, as investors stuck with their bets that a rapid rollout of the COVID-19 vaccine would allow the British economy to reopen over the next few months. Prime Minister Boris Johnson on Monday laid out a step-by-step plan for ending the current British lockdown.

"The pound made the most noise on a quiet night," said Doyle. In addition to the plans to end lockdowns, sterling has benefited in recent months from relief over Brexit and better-than-expected economic data, which diminished the chances the Bank of England would push interest rates below zero. Elsewhere, the euro strengthened 0.07% to $1.216 and the Japanese yen, the worst performing major currency of 2021, remained down on the day despite the weakening in the dollar. The dollar was last up 0.02% at 105.09 yen.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


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