The US dollar saw a growth against a basket of major currencies on Tuesday after Fed Chairman Jerome Powell told US lawmakers that the central bank would commit to a gradual increase in interest rates, despite further stimulus to tax cuts and government spending.
Powell pledged to strike a balance between the risk of economic collapse and the need to keep growth on track. His testimony in Congress was his first public appearance since he was sworn in as chairman of the council earlier this month.
Analysts say that Powell’s comments were generally positive for the dollar. He is also tough in the context of being very optimistic about the economy, but willing to go at a moderate pace to normalize monetary policy.
The dollar index, which measures the strength of the greenback against a basket of six other major currencies, rose by 0.48%, to trade at 90.27 points. The chairman of the Reserve Council, Powell, said that some of the adverse effects of the US economy in previous years had turned into tailwinds, referring to recent shifts in fiscal policy and global economic recovery.
The Federal Reserve is expected to approve the first rate increase in 2018 at its next monetary policy meeting in March, where it will also present new economic forecasts and Powell will hold his first press conference. Federal policymakers expect three rate increases for this year. Analysts generally believe that Powell’s comments on monetary policy and interest rates are logical. It is interesting to see that the market explains the comments as rather hawkish, and this is more informative about trade bias than the Fed’s likely policy course.
The greenback was up by 0.19% against the yen, with USD / JPY trading at 107.11 yen per dollar. The euro also fell against the US dollar by 0.26% and the EUR / USD pair traded at 1.2284 dollars per euro.
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