Powell presses pause on dollar's rally; sterling surging

The US dollar index fell for a third straight session yesterday and hit a two-week low of 92.233, then held near that level at 92.257 early in the Asia session. — AFP pic
The US dollar index fell for a third straight session yesterday and hit a two-week low of 92.233, then held near that level at 92.257 early in the Asia session. — AFP pic

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SINGAPORE, July 29 ― The dollar hovered around a two-week low today, weighed down by the latest insistence from Federal Reserve chairman Jerome Powell that rate increases aren't on the radar, while sterling has been riding higher with re-opening optimism.

Overnight, the Fed first sounded confident about the economy in its statement. Then Powell was more circumspect and said in his news conference that rate increases were “a ways away” and that the job market still had “some ground to cover”.

The greenback initially rose following the statement, before retreating to a two-week low of US$1.1849 (RM4.98) per euro after Powell's remarks.

It seems to be taking a breather from a month-long steady rise, and the euro is now above its 20-day moving average.

Improved market mood after Bloomberg reported China's securities regulator held a phone call with banks to soothe fears about the recent selloff also put some support behind riskier currencies overnight, analysts said.

“The reaction was to the Powell presser, which was seen as dovish,” said National Australia Bank's head of FX strategy Ray Attrill. “And improving risk sentiment should be associated with a weaker dollar,” he added, noting the rebound in US-listed China tech names and recent gains in re-opening exposed firms.

The US dollar index fell for a third straight session yesterday and hit a two-week low of 92.233, then held near that level at 92.257 early in the Asia session.

The Chinese yuan has recovered most of its Tuesday plunge, though it traded slightly on the back foot ahead of the open of onshore markets today, at 6.4902 per dollar.

The Australian dollar made a modest overnight rise, though it has been held back by a lengthening lockdown of Sydney which is set to drag on the national economy.

The Aussie last sat at US$0.7372 while the kiwi bounced from its overnight lows to hover around US$0.6959.

The Japanese yen has found support this week from nerves about the Delta coronavirus variant and jitters in China's equity market, and it held at 109.73 per dollar.

Another big mover this week has been sterling, as traders have been encouraged by early signs that England's end to most Covid restrictions last week has not been a disaster.

Sterling is up nearly 2.5 per cent from a low around US$1.3572 last week to trade at US$1.3906 on Thursday, and it touched an almost four-month high of 84.97 pence per euro overnight.

It has gained 3 per cent from last week's four-month low on the yen and is on a bit of a tear against the Aussie , rising 1.2 per cent over the week so far and more than 6 per cent year-to-date.

British infection numbers ticked higher yesterday, but the rolling averages are heading lower ― though experts, and Prime Minister Boris Johnson, have cautioned that it is too early to draw conclusions.

“At the moment, the UK's (Covid) position is pretty good and I do think that's had an impact,” said NAB's Attrill.

Ahead on Thursday traders await German labour and inflation data, European sentiment surveys and second-quarter US GDP ― where forecasts vary wildly but the consensus is for 8.5 per cent annualised growth. ― Reuters

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