Powell Comments Makes The US Dollar Slump Against Other Currencies
After the comments by Fed that there would be smaller rate hikes in the future, the US dollar dropped against its peers. According to experts, these comments boosted the risk appetite of the investors, which caused the flight of money away from safe-haven assets such as the USD.
The US Dollar index, which tracks the performance of the USD against other currencies, dropped to 105.705 level. Overall, the index dropped by 0.2%, and just a day before, it had dropped by 1%.
During November, the US index dropped by a whole 5%, making it one of the worst monthly closes since 2010 (almost 11 years). But let's not get too carried away, as the USD has managed to gain a lot during 2022 against its peers. Whether you look at the EUR/USD or the USD/JPY, the greenback had the upper hand.
However, maybe that's about to change as the Fed is going to make the new interest rate hikes much smaller. As per Powell's speech, the interest rate increase policy will become more moderate from December. But if inflation starts to rise once again, this shift in the policy could get reversed soon!
During the last meeting, the US central bank increased the rates once again by 75 basis points. But ever since the latest inflation data has become available, we have started to get more dovish comments from the Fed.
Although it will be bad news for the USD, the investors of the stock market and the crypto markets will actually rejoice in this development.
USD Losing Ground Against EUR, JPY, and GBP
USD/JPY dropped to 136.50 after losing 1.1% of its value. Overall, the pair has dropped to a 3-month low, indicating the strength of the JPY and the apparent weakness of the USD.
Similarly, EUR/USD touched the 1.0417 level after gaining 0.1%, which is basically 5 months high for the pair. As for the GBP/USD, it reached 1.2081 after gaining 0.2% showing the advance of GBP against the USD.