(Recasts with comments from Fed's Powell, adds data, Bitcoin price, updates prices)
- Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
The dollar pared losses on Friday after Federal Reserve Chairman Jerome Powell said the U.S. central bank should begin reducing its asset purchases soon, but should not yet raise interest rates.
Powell said employment is still too low and high inflation will likely abate next year as pressures from the COVID-19 pandemic fade, even as many market participants are concerned that rising price pressures will last longer than policymakers believe.
Investors have taken profits since the dollar index hit a one-year high last week, when concerns that inflation will remain stubbornly high for longer led investors to bring forward expectations on when the Fed will first raise rates to mid-2022.
Now, “there’s a bit of a positioning unwind taking place, we’ve obviously seen a firmer dollar since the September Fed,” said Mazen Issa, senior foreign exchange strategist at TD Securities in New York. “That also dovetails with the seasonal tendency for the dollar to soften into the end of the month.”
The Fed said at its September meeting that it will likely begin reducing its monthly bond purchases as soon as November, and signaled interest rate increases may follow more quickly than expected.
The dollar index =USD fell 0.10% to 93.64, and is down from a one-year high of 94.56 last week. The euro EUR=EBS gained 0.09% to $1.1636.
Data on Friday showed that U.S. business activity increased solidly in October, suggesting economic growth picked up at the start of the fourth quarter as COVID-19 infections subsided, though labor and raw material shortages held back manufacturing.
The dollar rally has also faded as investors build in expectations for sooner rate increases in other currencies.
Issa expects the dollar to regain traction, however, as global central banks push back against the aggressive repricing of rate hikes, while the Fed is likely to remain relatively hawkish and move forward with a reduction in its bond purchase program.
“Once we get the pushback from other central banks and the Fed’s committed to taper, we should see dollar dips really being shallow,” Issa said.
The Aussie dollar AUD=D3 , which is a proxy for risk appetite, gave up earlier gains and was last down 0.05% at $0.7462.
The safe-haven yen gained, though it remains the weakest performer, having dropped by almost 10% this year. The dollar was last down 0.50% against the Japanese currency JPY=D3 at 113.42 yen.
Bitcoin BTC=BTSP dropped 2.98 percent to $60,367. The cryptocurrency set a record high of $67,017 on Wednesday, after the launch of the first exchange-traded fund that buys U.S. bitcoin futures.
======================================================== Currency bid prices at 3:03PM (1903 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 93.6380 93.7410 -0.10% 4.064% +93.7890 +93.5340 Euro/Dollar EUR=EBS $1.1636 $1.1625 +0.09% -4.76% +$1.1656 +$1.1621 Dollar/Yen JPY=D3 113.4200 114.0200 -0.50% +9.84% +114.2000 +113.4400 Euro/Yen EURJPY= 131.97 132.50 -0.40% +3.98% +132.7900 +131.9300 Dollar/Swiss CHF=EBS 0.9162 0.9184 -0.24% +3.56% +0.9185 +0.9152 Sterling/Dollar GBP=D3 $1.3754 $1.3792 -0.27% +0.68% +$1.3815 +$1.3736 Dollar/Canadian CAD=D3 1.2370 1.2371 +0.00% -2.85% +1.2390 +1.2321 Aussie/Dollar AUD=D3 $0.7462 $0.7466 -0.05% -2.99% +$0.7512 +$0.7454 Euro/Swiss EURCHF= 1.0660 1.0673 -0.12% -1.36% +1.0682 +1.0659 Euro/Sterling EURGBP= 0.8458 0.8423 +0.42% -5.36% +0.8468 +0.8422 NZ NZD=D3 $0.7142 $0.7157 -0.17% -0.51% +$0.7188 +$0.7133 Dollar/DollarDollar/Norway NOK=D3 8.3595 8.3690 -0.14% -2.68% +8.3790 +8.3235 Euro/Norway EURNOK= 9.7295 9.7145 +0.15% -7.05% +9.7452 +9.6890 Dollar/Sweden SEK= 8.5751 8.6029 -0.19% +4.62% +8.6145 +8.5615 Euro/Sweden EURSEK= 9.9781 9.9973 -0.19% -0.98% +10.0050 +9.9712 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
