The Dollar Edges Down Ahead of Fed Chairman Powell’s Speech

The Dollar’s Movement

The dollar edged lower on Thursday, with markets eagerly awaiting a speech by Federal Reserve Chairman Jerome Powell. The focus is on whether Powell will address the recent fall in Treasury yields and the dollar, amid expectations that the U.S. central bank is finished raising interest rates.

Traders on Alert

Traders are also on alert for potential intervention to support the struggling Japanese yen, which is currently holding above 150 against the U.S. dollar and just above a one-year low reached last week.

Fed’s Dovish Tone

Last week, U.S. government bond yields and the greenback tumbled after Powell’s dovish tone following the Fed’s two-day meeting. Softer-than-expected jobs data on Friday added to the belief that the Fed will maintain its current stance.

Fed Officials’ Outlook

Some Fed officials, however, have adopted a more hawkish outlook and emphasized that further rate hikes remain on the table if inflation doesn’t come down closer to the Fed’s 2% annual target.

Market Speculation

Market analysts are speculating on the potential for a more hawkish stance from Powell, especially in currency pairs like the euro/dollar, where yields have exerted significant pressure.

Concerns about Japanese Intervention

Concerns about Japanese intervention to support the yen against the dollar have led traders to sell yen against the euro instead, resulting in the euro reaching a 15-year top of 161.72 yen early on Thursday.

BOJ’s Policy

Bank of Japan Governor Kazuo Ueda stated that the BOJ would maintain its policy of yield curve control and negative rates “until necessary to hit 2% inflation in a sustained manner”.

Cryptocurrency Movement

In the world of cryptocurrencies, Bitcoin jumped more than 5% to $37,978, marking its highest value since May 2022.

Currency Bid Prices

At 10:00AM (1500 GMT), currency bid prices showed the dollar index last down 0.11% on the day at 105.37. The euro gained 0.14% to $1.0724, while the dollar dipped 0.08% to 150.86 Japanese yen.

Market Expectations

A Reuters poll published on Thursday showed that economists expect the Fed to hold its federal funds rate steady through most of the first half of next year.

As the markets await Powell’s speech, the movement of the dollar and other currencies remains uncertain, with traders closely monitoring the potential impact of the Fed’s future decisions.