NEW YORK (Reuters) – The US dollar won on Thursday after Federal Reserve President Jerome Powell said it was highly expected that the US Federal Reserve would roll out an aggressive new strategy to boost US employment and inflation.
FILE PHOTO: A note in US Dollar can be seen in this illustration photo June 22, 2017. REUTERS / Thomas White / Illustration
Under the new approach, the US Federal Reserve will seek to achieve inflation averaging 2% over time and set off periods below 2% with higher inflation “for some time” and to ensure that employment does not fall below its maximum level.
“The market expected most of this,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
There are doubts about whether the Fed will be able to lift inflation despite the new target.
“The Fed has not reached its inflation target since 2012, and now they say, ‘Now we’re serious about it …’ I do not think that’s creating inflation or really inflation expectations, ‘” Chandler said.
The dollar index initially fell at the announcement before it rebounded to be up 0.20% the day at 93.00.
The greenback has been consolidated since losing 4% in July, the worst monthly loss in a decade.
The euro fell 0.07% to $ 1.1821.
If the Fed is able to increase price pressure but also leaves rates close to zero longer, the policy will be negative for the dollar.
“What will happen is when you have all the other central banks starting to withdraw their stimulus, starting to show signs of tightening, the Fed is going to hold on to that,” said Edward Moya, senior market analyst at OANDA in New York.
“You will see that the interest rate differential is not in favor of the dollar. It just provides a long-term bearish outlook for the greenback, ”Moya said.
Data on Thursday showed that the number of Americans filing new unemployment benefit claims fluctuated around 1 million last week, suggesting that labor market recovery was sustained as the COVID-19 pandemic pulls and government financial support dries out.
The British pound reached an eight-month high of $ 1.3283 against the greenback earlier on Thursday before falling back to $ 1.3202.
Reporting by Karen Brettell; Editing by Dan Grebler