LONDON (Reuters) – The dollar went higher against a basket of currencies Wednesday as markets awaited comments from Federal Reserve Chairman Jerome Powell, who is likely to renew his commitment to an ultra-easy policy.
The dollar is reversing against more risky currencies, even as pandemic hopes of a boost from the International Monetary Fund update the outlook for 2021 global growth.
Treasury yields, whose rise had boosted support for the dollar earlier this year, declined overnight amid warnings about the size and delay of President Joe Biden’s $ 1.9 trillion fiscal stimulus plan .
“While the Fed has been consistent for the past few months that the balance of risks remains to the downside, we will see a more neutral stance taken,” said John Velis, FX and macro strategist at BNY Mellon.
“This was seen as a gradual turnaround of the Committee, but we believe that the Chair will make it very clear that no flat rate or timeline is being considered for the purchase of thinner bonds. ”
Fed chairman is expected to speak at a press conference following the central bank’s two-day policy meeting, which ends Wednesday.
Earlier this month, he said in a web conference with Princeton University that the U.S. economy is still far from the Fed’s inflation and employment targets, and that it is too early to consider a monthly bond purchase change.
The dollar index rose 0.1% to 90.284 Wednesday in Europe, following a 0.2% decline the previous session.
The benchmark has been consolidating since kicking it near a three-year low of 89.206 at the beginning of the month.
The British pound climbed to its highest level since April 2018 at $ 1.3753 before trading slightly lower at $ 1.3724. [GBP/]
The Aussie dollar slipped 0.2% to 77.30 US cents, including a 0.5% rally on Tuesday.
EURO / DOLLAR = ECB / FED?
The euro fell 0.1% to $ 1.2146.
Analysts said reports on Tuesday that the European Central Bank was examining whether differences with Fed policy boost the euro – part of a wider review of funding conditions – would not have a significant impact on the Fed. frontier currency.
It may be “one of those headlines where it’s a momentary dip in euro / dollar dip here,” Jordan Rochester, Nomura’s FX strategist said in a note to clients. The euro / dollar spot rate remained long, Rochester said, with a target of $ 1.25 by the end of March.
ECB President Christine Lagarde has reiterated that the central bank is keeping a close eye on the single currency exchange rate.
“We suspect that they may find that higher inflation is more plausible in the US and that the position of the euro / dollar is more closely linked to the global manufacturing sector (which is doing well). e European services and, perhaps, a higher expectation for Europe. come back, ”said Lars Sparresø Merklin, senior analyst at Danske Bank.
“Either way, this is contributing to a growing number of seemingly uncomfortable countries with USD weakness.”
Reciting with Ritvik Carvalho; edited by Larry King