Dollar Down as Fed’s Powell Less Hawkish than Expected

By Zhang Mengying – The dollar was down on Thursday morning in Asia as comments from the U.S. Federal Reserve Chair Jerome Powell on future interest rate hikes sounded less hawkish than expected.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.13% to 106.31 by 1:34 AM ET (5:34 AM GMT).

The USD/JPY pair fell 0.77% to 135.49.

The AUD/USD pair stabilized at 0.6991, and the NZD/USD pair edged up 0.21% to 0.6274.

The USD/CNY pair edged down 0.19% to 6.7458, while the GBP/USD pair edged up 0.13% to 1.2167.

The Fed raised interest rates by 75 basis points to 2.25-2.5% as markets expected. Fed Chair Powell sounded less hawkish on taming inflation in his press conference, saying another “usually large” interest rate hike may be appropriate at the September meeting while the final decision will be determined by the incoming economic data.

“The dollar lost a little bit of altitude because I think the market was bracing for the potential of Fed chair Powell to sound a little bit more hawkish,” National Australia Bank senior FX strategist Rodrigo Catril told Reuters.

“The markets sort of focused on his comments around the fact that we are getting very close to neutral,” Catril said.

“There’s potential now to slow down the pace of hikes, and the market likes that.”

Investors shifted their focus to U.S. gross domestic product for the second quarter, which is due later in the day to see whether a technical recession happens.

“People are reducing their long (dollar) positions ahead of potentially negative data out of the U.S.,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters.

Against the yen specifically, “those who had expected rapid rises of U.S. interest rates are probably here taking profit,” Yamamoto added.

In cryptocurrency, bitcoin eased 0.64% to $22,822.73.

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