By Peter Nurse
Investing.com – The dollar fell lower in early European trading on Thursday, with investors heading to Federal Reserve President Jerome Powell for guidance on how the central bank could change its policy framework to help the US recovery.
At 02:50 ET (0650 GMT), the one tracking greenback against a basket of six other currencies had fallen 0.1% at 92942. was flat at 1.3208 while it was down 0.1% at 1.1824.
Powell is scheduled for the Fed’s annual central bank conference later Thursday, which is usually held in Jackson Hole, Wyoming, but is being held practically this year due to the ongoing Covid-19 pandemic.
The Fed chief is expected to discuss the results of the central bank’s framework assessment. A study started almost two years ago to examine how monetary policy should be adapted to an environment of low interest rates. He is scheduled to begin his speech at 9:10 ET (1310 GMT).
Many expect Powell to reiterate support for ongoing monetary policy expansion to ensure that economic recovery remains on track, likely by favoring average inflation targeting. In this way, the Fed can allow inflation levels to climb above its 2% target.
However, there are a few minor issues with this. How does the Fed get higher inflation? And how does that make politics even more accommodating, ”Robert Carnell at ING asked in a research note.
“The whole credibility of such a strategy rests on the Fed being able to convince the markets that these goals are achievable,” Carnell said. “In fact, it risks simply drawing attention to how much inflation targets are missing out – more a credibility-damaging shift than a credibility-enhancing target.”
Elsewhere, the pair rose 0.1% to 106.03. Japanese Prime Minister Shinzo Abe is due to worry about his health and potentially offering his resignation at a news conference on Friday.
The yen is likely to win if Abe decides to resign, as his departure could see a shift in the policy of the aggressive monetary easing that has been one of his trademark policies.
It dropped marginally to 6.8843 as Sino-US tensions coincided with China’s firing of four medium-sized ballistic missiles into the disputed South China Sea on Wednesday, while the United States imposed sanctions on another 24 Chinese companies.
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