US Markets

Dollar dips before Fed's Powell speaks on Thursday; data boosts euro

Credit: REUTERS/LEONHARD FOEGER

The dollar dipped on Tuesday as investors waited on comments from Federal Reserve Chairman Jerome Powell on Thursday about the U.S. central bank's policy framework review, and after data showed improving German business morale.

By Karen Brettell

NEW YORK, Aug 25 (Reuters) - The dollar dipped on Tuesday as investors waited on comments from Federal Reserve Chairman Jerome Powell on Thursday about the U.S. central bank's policy framework review, and after data showed improving German business morale.

The major focus for the dollar this week will be whether the Fed's Powell signals that the U.S. central bank will shift its inflation target to an average. This would allow inflation to rise higher than previously before the Fed raises rates, which would be a further negative for the dollar.

“The most anticipated conversation is going to be Chairman Powell’s speech on Thursday,” said Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California. "The expectation is that there might be a subtle shift in how much the Fed will be willing to tolerate higher inflation in the future."

The euro EUR= gained 0.41% on the day to $1.1835, after reaching $1.1965 on Monday, the highest since May 2018.

The dollar index measuring the greenback against a basket of currencies =USD fell 0.29% to 93.01.

The euro gained earlier on Tuesday after a German business climate index rose more than expected in August as both manufacturing and services picked up steam, boosting hopes that Europe's largest economy is set for a strong recovery following the massive coronavirus pandemic shock.

It is "another data point that helps keep the euro at this stretched level," said Kit Juckes, macro strategist at Societe Generale.

Rock-bottom interest rates and concerns about a more dovish inflation policy have reduced the relative appeal of the U.S. currency, while a relatively high level of COVID-19 infections is also casting doubts on the speed of the U.S. economic recovery compared with other regions, including Europe.

Data on Tuesday showed that U.S. consumer confidence dropped to a more than six-year low in August as households worried about the labor market and incomes, casting doubts on the sustainability of the economy's recovery from the COVID-19 recession.

The dollar also weakened against riskier currencies, but gained against the safe-haven Japanese yen after the United States and China said they are still committed to their Phase One trade deal.

The Australian dollar AUD= rose 0.49% to $0.7196.

The greenback rose 0.36% against the yen JPY= to 106.35 yen.

========================================================

Currency bid prices at 3:30PM (1930 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1835

$1.1787

+0.41%

+5.58%

+1.1844

+1.1784

Dollar/Yen

JPY=

106.3500

105.9700

+0.36%

-2.31%

+106.5700

+105.8800

Euro/Yen

EURJPY=

125.90

124.94

+0.77%

+3.24%

+126.0300

+124.9500

Dollar/Swiss

CHF=

0.9074

0.9117

-0.47%

-6.24%

+0.9126

+0.9075

Sterling/Dollar

GBP=

1.3145

1.3063

+0.63%

-0.86%

+1.3169

+1.3056

Dollar/Canadian

CAD=

1.3182

1.3216

-0.26%

+1.51%

+1.3239

+1.3177

Australian/Dollar

AUD=

0.7196

0.7161

+0.49%

+2.49%

+0.7197

+0.7152

Euro/Swiss

EURCHF=

1.0742

1.0749

-0.07%

-1.01%

+1.0768

+1.0732

Euro/Sterling

EURGBP=

0.9001

0.9021

-0.22%

+6.48%

+0.9037

+0.8984

NZ Dollar/Dollar

NZD=

0.6549

0.6525

+0.37%

-2.78%

+0.6558

+0.6516

Dollar/Norway

NOK=

8.9508

9.0021

-0.57%

+1.96%

+9.0123

+8.9277

Euro/Norway

EURNOK=

10.5959

10.6160

-0.19%

+7.70%

+10.6250

+10.5580

Dollar/Sweden

SEK=

8.7512

8.7877

-0.03%

-6.38%

+8.7958

+8.7333

Euro/Sweden

EURSEK=

10.3584

10.3612

-0.03%

-1.06%

+10.3835

+10.3300

dollar aug 25https://tmsnrt.rs/3lfXwfQ

(Reporting by Karen Brettell; Additional reporting by Olga Cortaga in London; Editing by Will Dunham and Dan Grebler)

((karen.brettell@tr.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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