The dollar gains strength against the euro and yen following Powell’s cautious perspective on interest rates
The U.S. dollar went up against the yen, the Swiss franc, and the euro on Wednesday after Federal Reserve Chair Jerome Powell said he was hesitant to ease policy even further overnight. The New Zealand dollar, on the other hand, went down after a new central bank chief was named.
The dollar got stronger against the Swiss franc by 0.46%, putting an end to two days of loses.
After German business morale dropped suddenly in September, the euro fell against the dollar. After going up for two days in a row, it was last down 0.67% at $1.1736. Sterling dropped to $1.3431, a drop of 0.68%. It didn’t change much against the euro, staying at 87.34 pence.
FOCUS ON INFLATION AND THE JOB MARKET
According to Marvin Loh, senior global market analyst at State Street in Boston, “the dollar is a little firmer against most of the G10, but it is still choppy and stuck in a range.”
“Based on our flows and holdings data, the dollar is still very underweight kind of within the real money community so I think it’s due for a period of consolidation and that’s ultimately what it’s doing.”
Powell remained cautious on Tuesday, saying that the Fed would have to keep weighing the risks of high inflation and a weakening job market in the next rate decision.
As promised by the central bank after last week’s meeting, markets expect the Fed to cut rates by a quarter point at its last two meetings this year and again in the first quarter of 2026.
The U.S. figures from this week, especially the personal consumption expenditures price index report on Friday, will be closely watched. This report is a key factor in determining what people think the Fed will do next in terms of policy.
“We are still data point-to-point with regard to the Fed, and that’s going to be the catalyst for rates and the dollar in terms of determining how aggressive or hawkish the market starts to view the Fed,” said Loh.
The U.S. dollar index, which compares the dollar to six major currencies, went up 0.65% to 97.87, trying to make up ground lost in the previous two sessions.
At a later time today, San Francisco Fed President Mary Daly will give a speech.
HEAD OF THE NEW ZEALAND CENTRAL BANK
On Wednesday, the candidates for the next leader of Japan’s ruling Liberal Democratic Party took questions from reporters. The candidate with the most votes, Sanae Takaichi, was a fiscal and monetary dove. She said that the Bank of Japan was in charge of monetary policy, but that higher rates could hurt mortgages and business investment.
The dollar gained 0.75% against the yen and reached 148.73 yen, its best level in three weeks. This was the end of three straight sessions of losses.
Following Anna Breman’s appointment as the next Reserve Bank governor, the Swedish central banker’s native currency fell 0.72% to $0.5814. She is the first woman to hold this position.
The value of the Australian dollar fell by 0.17% against the US dollar, reaching $0.6587. In August, inflation rose more than predicted to 3%, just less than a week before the next policy meeting of the Reserve Bank.
