NEW YORK (Reuters) – U.S. The dollar rose higher against a basket of currencies Wednesday, after Federal Reserve chairman Jerome Powell rejected the idea of using negative interest rates as a stimulus, despite sounding a bleak note on economic growth.
FILE PHOTO: A woman counts U.S. dollar bills at home in Buenos Aires, Argentina August 28, 2018. Photo taken August 28, 2018. REUTERS / Marcos Brindicci
In remarks issued by the Peterson Institute for International Economics, Powell said the country may face an “extended period” of weak growth.
Economic recovery may take time, depending on the progress being fought by the coronavirus pandemic, he said.
U.S.A. Dollar Currency Index = USD, which measures greenback’s strength against six major currencies, rose 0.23% on the day at 100.26. The index fell as low as 99.57 earlier in the session.
Powell said the Fed’s view on negative interest rates has not changed and that it is not something the politicians are looking at.
“Mr. Powell’s resolute downturn of negative rates will be a breeze for dollar bulls who may be using today’s event to bid greenback higher,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Dealers or short-term U.S. reduced interest rate futures The Fed will take the unprecedented step of pushing interest rates to zero. Nevertheless, futures contracts due in April 2021 and beyond still signaled expectations of negative prices, according to CME Group’s FedWatch tool.
U.S. President Donald Trump on Tuesday called for the U.S. to “accept the gift” of negative rates – when data showed that the U.S. consumer prices fell 0.8% in April, the biggest fall since December 2008 when the economy was in a recession.
The dollar index has been trading within a tight range over the past few weeks, but remains only 3% shy of a more than three-year hit at the end of March, supported by increased demand for safe harbor as financial markets continue to hit edge with the economic impact of the pandemic.
While the dollar has benefited from safe harbor flows in the midst of market turmoil, the outlook remains fragmented as hedge funds keep their short stakes on the currency while institutional investors remain bullish.
The stronger dollar sent the British pound to its lowest in five weeks. The pound was last down 0.37% against the greenback.
The New Zealand Dollar NZD = slipped 1.6% after the country’s central bank doubled the amount of bonds it bought and opened the door to negative interest rates, sending long-term bond yields at the lowest times.
Reporting by Saqib Iqbal Ahmed; Editing by David Gregorio and Andrea Ricci