TOKYO, July 11 — The US dollar was soft today after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month, vowing to “act as appropriate” to ensure the world's biggest economy will be able to sustain a decade-long expansion.
In testimony to Congress, Powell pointed to “broad” global weakness that was clouding the US economic outlook amid uncertainty about the fallout from the Trump administration's trade conflict with China and other nations.
Adding to a generally dovish tone in his testimony, the minutes from the Fed's previous policy meeting showed many policy makers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut.
The euro traded at US$1.1260, little changed in early Asia after having gained 0.38 per cent the previous day.
The US dollar dipped 0.1 per cent to 108.31 yen, extending its slide from a six-week high of 108.99 set on Wednesday before Powell's testimony.
The US dollar's index against six major currencies slipped about 0.4 per cent yesterday, turning negative on the week, to 97.104.
Money market futures price have jumped to price in about 30 per cent chance that the Fed will cut rates by 50 basis points at its next policy review on July 30-31 — a scenario that had been priced out after Friday's strong US jobs data.
A 25-basis-point cut is already fully factored in.
“A rate cut in July is completely sealed now. But on the other hand, Powell dropped little hint on what he would do after that, as he sounded quite optimistic on the economy,” said Kyosuke Suzuki, director of forex at Societe Generale.
“That uncertainty, I think, will most likely keep the US dollar in fairly tight ranges in coming weeks,” he said.
Elsewhere, the British pound also bounced off from six-month lows to trade at US$1.2508.
But it is still down on the week as the British currency has been dogged by Britain's economic gloom and a fast-approaching Brexit deadline.
A raft of dismal UK data and the risk of crashing out of the European Union without agreeing transitional trade arrangements have forced the Bank of England to change its upbeat assessment of the economy.
In contrast, the Canadian dollar moved closer to last week's eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the Fed, making clear it had no intention of easing monetary policy.
The Canadian dollar stood at C$1.3072 per US dollar, not far from C$1.3038 touched a week ago. — Reuters
