Banknotes in US dollars are being arranged for a photograph on September 7, 2017 in Hong Kong.
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The dollar swelled near its lowest level in the week on Thursday as investors looked for tips from Federal Reserve Chairman Jerome Powell that the central bank could possibly refine its policy framework to help push inflation up.
Powell is scheduled to hold the Fed’s annual central bank conference later in the day, which is usually held in Jackson Hole, Wyoming, but is being conducted largely this year due to the ongoing Covid-19 pandemic.
Investors are betting that the US Federal Reserve will introduce a new policy framework to combat sustained low inflation as early as next month.
“If the Fed turns out to be less informal than many have thought, we could see a demonstration in the dollar,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
The dollar’s index against six major currencies stood at 92,893, near the weakest level so far this week, and not far from the two-year low of 92,124 touched last week.
Since the start of the pandemic, the Federal Reserve has expanded its balance sheet by as much as about $ 3 trillion, far more than the European Central Bank and Bank of Japan.
The euro changed hands to $ 1.1833, near the highest level so far this week, although few market participants expect a clear break from its territory so far this week ahead of Powell’s speech.
The dollar slipped to 105.97 and lost steam after hitting a one-week high of 106.58 on Tuesday.
“A more aggressive Fed policy tends to weaken the dollar, and the issuance of this policy change has already been a factor in the recent mild yen strength,” said John Vail, worldwide strategist at Nikko Asset Management.
A key focus for the yen is Prime Minister Shinzo Obe’s news conference scheduled for Friday amid growing speculation about his health.
The yen is likely to win if Abe decides to resign, given that aggressive monetary easing with close cooperation between the government and the central bank, called Abenomics, has been one of his trademark policies, traders said.
The British pound stood at $ 1.3211 and had risen 0.9% since the beginning of the week, while the Australian dollar changed hands to $ 0.77238, up 1.1% so far this week.
The Chinese yuan has been at its strong level since January, after data showed a recovery in profits of China’s industrial companies.
Offshore yuan stood at 6.8783 per dollar, its highest level since January 21st.
The market seems to have pulled away from the recent signs of rising tensions between the two countries.
The United States on Wednesday blacklisted 24 Chinese companies and targeted individuals they said were part of construction and military operations in the South China Sea, where its first such sanctions moved toward Beijing across the disputed strategic waterway.