22-6-2023 (SINGAPORE) The dollar remained near a one-month low against a basket of currencies on Thursday following Federal Reserve Chair Jerome Powell’s familiar messaging during his semi-annual testimony, which offered little room for surprise.
Meanwhile, sterling hovered close to a one-year high ahead of the Bank of England’s (BoE) interest rate decision later in the day, with Wednesday’s high inflation report likely to keep policymakers on their toes.
During his remarks to lawmakers on Capitol Hill, Powell stated that further U.S. rate increases are “a pretty good guess” if the economy continues on its current trajectory. These comments were in line with the central bank’s stance at its recent policy meeting.
As a result, the greenback depreciated by nearly 0.5% against a basket of six major peers in the previous session. The U.S. dollar index stood at 102.05 in early Asia trade, not far from its recent five-week low of 102.00.
The euro climbed to a more than one-month high of $1.09925, extending its 0.65% jump from Wednesday.
“Markets had already priced in a lot of hawkishness from Powell prior to his testimony, so his comments didn’t come as a big surprise on the hawkish end,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA). She added, “At this stage, (markets) are not convinced that the FOMC can do two more rate hikes this year.”
In other news, sterling rose 0.02% to $1.2770, remaining close to a one-year high of $1.2849 reached last week.
Later in the day, the BoE is expected to raise interest rates for the 13th consecutive time, following higher-than-expected inflation data. However, investors are divided between a 25-basis-point and 50-basis-point hike.
British inflation remained unchanged in May, standing at 8.7%, defying market expectations and making it the highest among major economies.
“The strong UK inflation data raised the probability of a larger hike than 25 basis points, a higher terminal rate, and rates staying higher for longer,” noted economists at ANZ in a research note.
Against the Japanese yen, the dollar slipped 0.06% to 141.82, after reaching a seven-month peak of 142.37 yen in the previous session.
The Japanese currency faced renewed pressure as the Bank of Japan (BOJ) maintained its ultra-dovish stance. BOJ board member Seiji Adachi signaled a small chance for a July policy adjustment during Wednesday’s session.
Waiting for Stimulus
In Asia, the Chinese offshore yuan remained near Wednesday’s seven-month low, trading at 7.1798 per dollar, as traders awaited additional support measures from Beijing to revive China’s struggling economic recovery.
“Until we receive confirmation on a stimulus package, the yuan will likely continue to face downward pressure due to the weak outlook for the Chinese economy, and this, in turn, will be a headwind for the Australian dollar as well,” commented CBA’s Kong.
The Australian dollar edged 0.07% higher to $0.6801, while the kiwi rose 0.17% to $0.6213.
In the realm of cryptocurrencies, Bitcoin gained 0.7% to reach $30,218. It surpassed the $30,000 level for the first time since April on Wednesday, buoyed by BlackRock’s plan to create a Bitcoin exchange-traded fund (ETF), despite ongoing regulatory scrutiny in the sector.
“The dark clouds overshadowing crypto have lifted in recent days amid a burst of institutional interest,” stated Kate Laurence, co-founder and CEO of Bloccelerate VC.
She added, “The likes of Blackrock, Charles Schwab, Fidelity, and Citadel throwing their hats into the crypto ring is hugely significant because it shows that institutions are very serious about the space despite the recent regulatory crackdown.”
According to The Wall Street Journal, EDX Markets, a crypto exchange backed by Citadel Securities, Fidelity, and Schwab, has begun operations.
