Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar Index Gains After Powell Signals Commitment to Higher Rates

Published 08/29/2022, 03:38 AM
Updated 08/29/2022, 03:39 AM
© Reuters

© Reuters

By Scott Kanowsky

Investing.com -- The U.S. dollar touched a 20-year high against a basket of major currencies on Monday, as investors digest a pledge from Federal Reserve chair Jerome Powell to keep interest rates higher in a bid to bring down surging inflation.

As of 02:44 ET (06:44 GMT), the dollar index was trading at 109.26, pulling back from a new two-decade peak of 109.48 hit earlier in the trading session.

The greenback's counterparts in Asia slid. The offshore yuan also hit a new two-year low of $6.9321, while the Japanese yen dropped to 138.88 compared to the dollar.

Meanwhile, the Australian dollar decreased to $0.6858 and the New Zealand dollar fell to $0.6109.

The moves come after Powell said at a closely-watched central bank symposium in Jackson Hole, Wyoming that the Fed has no plans for a dovish change in its rate policy and will continue to raise borrowing costs.

He also warned that U.S. economic growth may be dented by higher rates, saying households and businesses may face "some pain" before soaring consumer prices are corralled.

Powell's comments spurred on bets that the Fed will hike borrowing costs by 75 basis points in September and that rates will end the year well above 3%.

The focus now shifts to U.S. payrolls data due out on Friday. A strong labor market report may give the Fed additional room to maintain its current pace of monetary policy tightening.

Elsewhere, the euro's brief foray above dollar parity lost steam, with the common currency exchanging hands at $0.9944 in morning European trading. The euro had been lifted late last week on reports that the European Central Bank may also discuss raising its key rates by as much as 75 basis points at their next meeting in September.

But concerns remain about the bloc's ability to weather a looming energy crisis brought on by unscheduled maintenance of a key gas supply line out of Russia this week. Gazprom (MCX:GAZP), the Moscow-backed energy giant, is expected to stop flows of natural gas to Europe via the crucial Nord Stream 1 pipeline between August 31 and September 2.

Finally, in cryptocurrencies, Bitcoin traded down 1.16% at $19,821 as investor sentiment for riskier assets waned in the wake of Powell's statement.

Latest comments

I love Powell now for being hawkish. May Allah ensure he maintains course.
Dollar strength is temporary. The Fed and the western financial system are raising rates to bolster the western fiat system. However there is no American or European productive enterprise backing it: our bankers print money and we buy goods from China and oil from the Saudis and the Russians. The FRN (aka as the illegal because unconstitutional dollar) is only backed by our military, not our economic enterprise. Unless we start producing at home most of what we consume, the dollar stands to lose most of its purchasing power within the next several years.
Good Job
Good Job
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.