The dollar managed to hold firm on Thursday following the hawkish speech delivered by the Federal Reserve’s new chief Jerome Powell on the US economy.
The US dollar index, which tracks the greenback’s strength against a basket of six other major currencies, increased 0.04 percent, reaching a five-week high at 90.65.
Because of Powell’s optimistic tone on the US economy, the dollar was able to penetrate the 90 handle. The momentum has not yet slowed, with the market on the lookout for more signals from him for a possible fourth rate hike. He is set to testify in front of the Senate Banking Committee.
The dollar and the yen traded 0.06 percent higher at 106.74. Bank of Japan’s policy board member Goushi Kataoka called for more easing efforts, aiming to hit the central bank’s 2 percent inflation target. He said that the price situation in Japan was no longer deflationary, although he also warned that hitting the inflation target during the 2019 fiscal year is still unlikely.
The AUD/USD pair slid 0.43 percent to 0.7728. The Aussie slipped to a new low level this year after its big miss in Q4 CAPEX. The country’s Q4 seasonally adjusted CAPEX dropped 0.2 percent quarter-on-quarter, which meant it missed market estimates of a 0.9 percent growth.
“The Aussie looked bearish after it had fallen below its 200-day moving average and the weak data triggered renewed weakness,” said State Street’s Wakabayashi. “With Australian bond yields no longer higher than US bonds, it no longer has the attraction it used to have for a long time. I’m quite bearish on the currency.”
Meanwhile, the People’s Bank of China set the fix rate against the dollar at 6.3360 versus the previous rate of 6.2394. The USD/CNY exchanged hands at 6.3408, 0.17 percent higher. China Caixin manufacturing PMI was at 51.6, going pass estimates of 51.3.
Dollar Still Possible To Fall; Euro At Five-Week Low
There are still lingering concerns over the dollar’s strength, as some market watchers say that the greenback can falter again. This is due to the fact that any support for the currency from higher interest rates has been relatively insubstantial.
Last year, the dollar index fell almost 10 percent, its steepest plummet for more than a decade. The slump happened in spite of the fact that no other major central banks raised interest rates except the Fed.
This year, the dollar index is still down 1.5 percent, pursued by suspicions that the Trump administration prefers a weaker dollar to fix its ballooning trade deficit. There are also worries that big tax cuts and spending plans may fuel fiscal deficits to a level where they undermine confidence in US debt.
Meanwhile, the inflation data in the euro zone blemished expectations that the European Central Bank will ease up on its monetary stimulus. This caused the euro to tumble to 5-week lows against the dollar and a 6-month rock bottom against the yen.
ECB president Mario Draghi said that the slack in the euro zone economy may be larger than expected.
The euro slid to $1.21835, its lowest since January 18. It plummeted to 129.86 against the yen, it steepest decline since the early part of September and down 5.6 percent from its 2-and-a-half-year high, which was hit only a month ago.
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