Dollar inches higher, Fed Chair Powell’s speech major focus this week
The dollar edged higher on Monday before Federal Reserve Chairman Jerome Powell this week will give a highly anticipated speech about the U.S. central bank’s policy framework review.
A sharp dollar selloff against the euro has paused, with the greenback getting a boost on Friday after data showed a recovery in U.S. business conditions, while European data showed slowing improvement.
Powell’s speech on Thursday will likely be the next major dollar driver, with investors watching to see if he signals that the U.S. central bank will shift its inflation target to an average. This would allow inflation to rise higher than previously before the Fed raises rates, making up for decades of benign price increases.
The euro fell 0.06% against the dollar to $1.1788, after hitting a more-than-two-year high of $1.1965 on Friday before the data.
The dollar index against a basket of major currencies gained 0.12% to 93.31.
The dollar was also boosted by improving risk appetite after the U.S. Food & Drug Administration (FDA) on Sunday said it authorized the use of blood plasma from patients who have recovered from COVID-19 as a treatment for the disease.
The number of new cases of the novel coronavirus reported in the United States fell 17% last week, the fifth straight week of declines, according to a Reuters tally of state and county reports.
Republicans will make their case this week that the U.S. economic and political future depends on the re-election of Donald Trump at a four-day party convention that will feature the president speaking every night.
The dollar may slide further, but analysts say its demise is ‘greatly exaggerated’
The weakening U.S. dollar is set to slide even further, but its importance as the world’s reserve currency is unlikely to be diminished, according to analysts.
The greenback had benefited as investors flew to safety amid the pandemic, which drove it to a three-and-a-half year high in March.
But now strategists say the country’s economic recovery is in question, given its weak coronavirus response. The dollar had also reacted to the country’s surging deficit and the prospect of U.S. interest rates remaining lower for longer.
The dollar index fell to a 27-month low last week at 92.477, a steep decline from its 102 level in March. Since then, it has been fluctuating, swinging between the 92 and 93 levels in the past week. It was last at 93.150 on Monday.
Reference: CNBC
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