US dollar slips amid Fed’s new strategy

The US dollar weakened in late trading on Monday as market participants continued to digest the Federal Reserve’s policy shift on inflation.

The dollar index, which measures the greenback against six major peers, decreased 0.23 per cent at 92.1605.

In late New York trading, the euro rose to $1.1935 from $1.1890 in the previous session, and the British pound rose to $1.3376 from $1.3341 dollars in the previous session. The Australian dollar was up to $0.7387 from $0.7356, Xinhua reported.

The US dollar bought 105.87 Japanese yen, higher than 105.41 Japanese yen of the previous session. The US dollar decreased to 0.9032 Swiss franc from 0.9050 Swiss franc, and it was down to 1.3027 Canadian dollars from 1.3094 Canadian dollars.

US Federal Reserve Chairman Jerome Powell announced on Thursday that the central bank will seek to achieve inflation that averages 2 per cent over time, a new strategy for carrying out monetary policy to help fight the Covid-19 pandemic and boost economic recovery.

The flexible average inflation targeting was widely interpreted as that sustained low interest rates could be expected for at least a few years.

“Even if US central bankers are likely to be pleased about the interpretation of their measures, it is not good news for the dollar,” Ulrich Leuchtmann, analyst at Commerzbank, said in a note on Monday.

“If one expects the domestic purchasing power of the dollar to be eroded more quickly (as that is what inflation is) it is difficult to assume that it will maintain its purchasing power on the FX market in the long run,” Leuchtmann added.

Analysts also argued that the new Fed strategy still requires some explanation and it is still far from clear how it will be implemented in reality.

Leave A Reply

Your email address will not be published.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More