Dollar hit one-month high after Powell’s comments 

The U.S. dollar hit one-month high on September 23 and pressed the euro towards major support levels. As we know, the Fed set the stage for rate hikes in 2022, earlier than other developed markets are anticipated to move.

Remarkably, the U.S. central bank left policy settings intact overnight and didn’t announce the beginning of asset purchase tapering. However, the Fed reported a moderation in the pace of asset purchases might soon be warranted. Additionally, Federal Reserve Chairman Jerome Powell stated board members believed tapering could conclude around 2022.

The U.S. currency surged broadly after his comments, especially versus the euro and yen. Additionally, the Federal Reserve funds futures markets moved to price a 50% chance of a hike in October.

Moreover, liquidity was lightened by a holiday in Japan on September 23.

John Briggs, a strategist at NatWest Markets, announced that Jerome Powell didn’t give any specifics about the start of the taper. Powell reported there was broad deal in the end of taper, which concludes around the mid-2022. 

The safe-haven Japanese yen also lost ground after Jerome Powell’s news conference. The currency ended up declining 0.5% for the session – its sharpest fall in more than three months. It settled at 09.87 against the U.S. dollar.

The U.S. dollar index reached a one-month peak of 93.526.

the Bank of Japan (BoJ) made no policy changes and isn’t seen lifting rates anytime soon

As we know, the Bank of Japan met on September 22. The bank didn’t make policy changes and isn’t seen lifting rates anytime soon. Meanwhile, the European Central Bank (ECB) is also lagging the Federal Reserve.

On Wednesday, the yen had also declined. The slump came as China Evergrande offered the market some relief after its main unit announced it agreed to settle a bond interest payment with some domestic creditors.

The risk-sensitive currencies, the Australian and New Zealand dollars, gave up gains after Powell’s comments. Both currencies were traded slightly lower in Asia. The Australian dollar fell by 0.1% at $0.7323, while its New Zealand counterpart, the New Zealand dollar, fell below $0.70 to settle at $0.6992.

The Bank of England (BoE) meets on Thursday, with traders anticipating it to keep rates steady but wary of any hawkish surprises. The British pound is hovering nearly $1.3615.

Moreover, Norges Bank is widely anticipated to deliver the first hike among G10 central banks on Thursday. Remarkably, the Norwegian Crown was steady in Asia at 8.669 against the dollar.