Dollar gains after Powell warns on rates, yen at one-week low
By Karen Brettell
NEW YORK (Reuters) — The dollar gained on Thursday and hit a one-week high against the Japanese yen after Federal Reserve Chair Jerome Powell said that Fed policymakers are «are not confident» that interest rates are yet high enough to finish the battle with inflation.
The dollar index was last up 0.35% on the day at 105.86. The euro fell 0.37% to $1.0671. The dollar gained 0.21% to 151.29 Japanese yen, the highest since Nov. 1.
Traders remained on alert for potential intervention to shore up the struggling Japanese currency, which is near a one-year low of 151.74 reached last week.
The dollar’s rally in the wake of Powell’s comments also came after a brief spike higher on the back of a weak auction of 30-year Treasury bonds, which sent yields higher across Treasury maturities.
“I don’t think Powell said anything significantly new, but I think the markets took his comments as somewhat hawkish. But I also think the rates market was still somewhat jittery after the auction so higher yields was the path of least resistance,” said Vassili Serebriakov, an FX strategist at UBS in New York.
The dollar benefited from the run-up in Treasury yields over the past few months, but dropped last week as yields also fell sharply. This came after Powell was interpreted as striking a dovish tone after the Fed’s two-day meeting, with softer-then-expected jobs data on Friday adding to a belief that the Fed has finished hiking interest rates.
Some Fed officials this week have adopted a more hawkish outlook and stressed that further rate hikes remained on the table if inflation doesn’t continue to come down closer to the Fed’s 2% annual target.
“They don’t think their job in inflation is done. I think there is some
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