- The dollar rises
- Traders are awaiting Powell’s testimony
SINGAPORE, Jun 21 (Portal) – The dollar was firmer on Wednesday as Federal Reserve Chair Jerome Powell appeared before Congress, where he is expected to adopt a hawkish tone, while sterling edged up slightly after UK inflation data came out hotter than expected.
The annual rate of change in UK consumer prices was stable at 8.7% in May, contrary to hopes that it had slowed since April. Sterling briefly rose as much as 0.3% against the dollar to hit $1.2803 before settling back down to $1.2765.
The euro and yen also edged higher as traders bet the Bank of England would have to hike interest rates. Markets are now pricing in another 150 basis point hike to peak at 6% in a year.
The euro stayed at $1.0914 in Asian trading, while the yen slipped slightly to 141.80 per dollar as Bank of Japan minutes and officials maintained a dovish stance and traders shifted their focus to the Fed judged
Powell will begin testifying before Congress at 2pm GMT.
“Even though Fed officials paused last week, they were still surprisingly aggressive in forecasting another 50 basis point rate hikes through late 2023,” currency analysts at Maybank said.
“It’s crucial to see whether (Powell) would reinforce the position that the Fed is serious about another 50 basis point rate hikes or give the impression that they are ‘data dependent,'” they said. “The former could do more to provide additional support to the dollar index and yields.”
Elsewhere, there was little appetite for a recovery in either the yuan or the Australian dollar, hurt by China’s shaky economic recovery and lack of major stimulus.
China set its yuan midpoint weaker-than-expected on Wednesday and the currency slipped to a fresh seven-month low of 7.1987 in onshore trades, while the offshore yuan weakened to above 7.2 against the dollar.
The Aussie suffered further losses on Tuesday following less hawkish central bank protocols following this month’s rate hike. It fell 0.9% overnight and was last bought at $0.6786.
“The path of least resistance is more declines,” said Commonwealth Bank of Australia strategist Joe Capurso.
“The Aussie could drop below 0.6700 this week, especially if Powell takes a hawkish stance,” he said.
The New Zealand dollar was dragged down in sympathy, falling below its 50-day moving average before stabilizing just above its 200-day moving average at $0.6178.
US Dollar Index was marginally firmer at 102.60. Bitcoin increased its overnight gains to $29,000 for the first time since late May, helped by the launch of a new crypto exchange backed by Fidelity, Citadel Securities and Charles Schwab.
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Currency bid prices at 0609 GMT
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Reporting by Tom Westbrook; Edited by Sam Holmes and Kim Coghill
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