U.S. Dollar Fell as Investors Analyzed Powell’s Speech

The U.S. dollar fell on Monday morning in Asia, as investors continued to digest Jerome Powell’s dovish speech on bond tapering at the Jackson Hole symposium on Friday. 

The U.S. dollar index declined 0.06% to 92.640 by 12:01 AM ET.

On Monday morning, the USD/JPY fell 0.06% to 109.76.

The AUD/USD pair dropped 0.10% to 0.7303. The NZD/USD pair fell 0.08% to 0.6999.

The USD/CNY pair also declined on Monday morning. The pair dropped 0.05% to 6.4678 with Caixin Manufacturing Purchasing Managers Index due on Wednesday. 

The GBP/USD pair rose 0.4% to 1.3769.

Jerome Powell, dollar, and investors 

As stated above, the U.S. dollar declined on Monday morning. It is hard to blame investors as they have to deal with numerous challenges. Several days ago, Jerome Powell delivered a robust defense of the Fed’s monetary policy in the era of Covid-19. Nonetheless, he stated that the central bank could reduce the pace of bond purchases toward the end of the year.

His speech at the annual economic policy symposium was a remote affair. The rise of the highly contagious Delta coronavirus variant forced the Kansas City Federal Reserve to change its plans and hold a virtual event. Its decision only underlines the uncertain environment the central bank is navigating in 2021. 

In a much-anticipated speech, he said the economy reached a point where it no longer needs as much policy support. So, that means the Fed will begin cutting the amount of bonds it buys each month before the end of 2021, as long as economic progress continues. Fed Vice Chair Richard Clarida stated that agrees with Powell’s remarks. Neither Powell nor Clarida set a specific date for when the process will begin. 

Powell’s speech immediately helped to boost stock indexes. His much-anticipated speech also reduced the value of the U.S. dollar versus other currencies.