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- Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
The dollar index gained on Friday after Federal Reserve Chair Jerome Powell adopted a hawkish tone to battling inflation, but did not settle the debate on how large a rate increase is likely at the U.S. central bank’s September meeting.
The U.S. economy will need tight monetary policy "for some time" before inflation is under control, which means slower growth, a weaker job market and "some pain" for households and businesses, Powell said on Friday in remarks that warned there is no quick cure for fast rising prices.
Powell gave no indication of how high interest rates might rise before the Fed is finished, only that they will move as high as needed as it seeks to bring down inflation to its 2% target.
“I think overall the Fed chairman was really hawkish, but not above and beyond what had been priced in and I think the jury is still out on whether or not we see a 50 or 75 basis point rate hike next month,” said Joe Manimbo, senior market analyst at Convera in Washington.
Jobs and inflation data for August that will be released before the Fed’s Sept. 20-21 meeting will now be key to the size of the Fed’s next rate increase, Manimbo added.
The dollar index =USD was last at 108.56, up 0.09% on the day, after falling to 107.54 earlier on Friday. It is down from a five-week high of 109.27 on Tuesday and is holding below a 20-year high of 109.29 reached on July 14.
The euro EUR=EBS rose 0.18% to $0.9989. It has bounced from a 20-year low of $0.99005 on Tuesday. The dollar also gained 0.58% against the Japanese yen JPY=D3 to 137.27.
The dollar dipped earlier on Friday after data showed that U.S. consumer spending barely rose in July as a drop in gasoline prices weighed on receipts at service stations, and that monthly inflation slowed down considerably.
Other data on Friday showed that U.S. consumer sentiment improved further in August and households' near-term inflation expectations fell to an eight-month low.
Atlanta Fed President Raphael Bostic said earlier on Friday that with data showing U.S. inflation is slowing, he is "leaning" toward supporting a 50 basis point rate hike in September on the way toward getting the policy rate to 3.5% to 3.75% by year end.
Fed funds futures traders are pricing in a 56% chance of a Fed rate hike of another 75 basis points at its September meeting, compared with 45% before Powell’s comments, and a 44% probability of a 50 basis points increase. FEDWATCH
The euro also hit a session high against the greenback earlier on Friday after Reuters reported that some European Central Bank policymakers want to discuss a 75 basis points interest rate hike at the September policy meeting, even if recession risks loom, as the inflation outlook is deteriorating.
======================================================== Currency bid prices at 11:17AM (1517 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 108.5600 108.4800 +0.09% 13.482% +108.7500 +107.5400 Euro/Dollar EUR=EBS $0.9989 $0.9972 +0.18% -12.13% +$1.0090 +$0.9947 Dollar/Yen JPY=EBS 137.2700 136.4800 +0.58% +19.24% +137.3350 +136.1900 Euro/Yen EURJPY= 137.11 136.14 +0.71% +5.21% +137.9600 +136.1000 Dollar/Swiss CHF=EBS 0.9649 0.9637 +0.09% +5.74% +0.9659 +0.9579 Sterling/Dollar GBP=D3 $1.1756 $1.1838 -0.65% -13.04% +$1.1900 +$1.1761 Dollar/Canadian CAD=D3 1.3004 1.2924 +0.60% +2.84% +1.3004 +1.2905 Aussie/Dollar AUD=D3 $0.6917 $0.6981 -0.90% -4.83% +$0.7009 +$0.6918 Euro/Swiss EURCHF= 0.9637 0.9608 +0.30% -7.06% +0.9673 +0.9601 Euro/Sterling EURGBP= 0.8494 0.8428 +0.78% +1.12% +0.8502 +0.8427 NZ NZD=D3 $0.6159 $0.6226 -1.06% -10.00% +$0.6232 +$0.6160 Dollar/DollarDollar/Norway NOK=D3 9.7250 9.6540 +0.67% +10.32% +9.7255 +9.5840 Euro/Norway EURNOK= 9.7168 9.6275 +0.93% -2.97% +9.7179 +9.6345 Dollar/Sweden SEK= 10.6328 10.5862 +0.63% +17.91% +10.6351 +10.4778 Euro/Sweden EURSEK= 10.6178 10.5513 +0.63% +3.75% +10.6235 +10.5500
