NEW YORK, Oct.22 (Reuters) – The dollar cut losses on Friday after Federal Reserve Chairman Jerome Powell said the US central bank should start cutting asset purchases soon, but should not further raise interest rates.

Powell said employment is still too low and high inflation will likely decline next year as pressures from the COVID-19 pandemic subside, although many market participants fear the rise. price pressure lasts longer than policymakers realize. Read more

Investors have taken profits since the dollar index hit a year-long high last week, when concerns that inflation will remain stubbornly high for longer led investors to anticipate when the Fed will increase rates for the first time until mid-2022.

Now, “There is a bit of loosening in positioning, we’ve obviously seen a stronger dollar since the Fed in September,” said Mazen Issa, senior currency strategist at TD Securities in New York. “It also matches the dollar’s seasonal tendency to ease through the end of the month.”

The Fed said at its September meeting that it would likely start cutting its monthly bond purchases as early as November, and signaled that interest rate hikes could follow sooner than expected. Read more

The dollar index fell 0.10% to 93.64, and is down from a one-year high of 94.56 last week. The euro gained 0.09% to $ 1.1636.

Data on Friday showed that business activity in the United States increased sharply in October, suggesting that economic growth accelerated at the start of the fourth quarter as COVID-19 infections eased, although that labor and raw material shortages have hampered manufacturing. Read more

The dollar rally has also faded as investors expect faster rate hikes in other currencies.

Issa, however, expects the dollar to regain strength, as global central banks oppose aggressive rate hikes revisions, while the Fed is expected to remain relatively hawkish and move forward with a cut. of its bond purchase program.

“Once we get the pullback from other central banks and the Fed has committed to gradually reducing, we should see really shallow dollar declines,” Issa said.

The Australian dollar, which is a proxy for risk appetite, gave up on earlier gains and lost 0.05% for the last time to $ 0.7462.

The yen, a safe haven, appreciated, although it remains the worst performing, having fallen by nearly 10% this year. The dollar lost 0.50% for the last time against the Japanese currency at 113.42 yen.

Bitcoin fell 2.98% to $ 60,367. The cryptocurrency hit a record high of $ 67,017 on Wednesday, after the launch of the first exchange-traded fund to buy U.S. bitcoin futures.

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Currency Bid Price at 3:03 PM (1903 GMT)

Reporting by Karen Brettell; Editing by Susan Fenton and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.


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