The U.S. dollar recorded a sharp decline on Wednesday after Federal Reserve Chairman Jerome Powell said the U.S. economy was ‘still a long way’ from the levels the central bank wanted to see before easing economic stimulus.
Powell's comments came a day after U.S. inflation data showed the inflation rate recorded its highest reading in more than 13 years for June. This has indirectly pushed the US dollar to strengthen to a 3 -month high and made market players worried that the Fed will start reducing economic stimulus.
The concerns were heightened when the Reserve Bank of New Zealand said on Wednesday that it would end bond purchases, raising expectations that the central bank would raise rates in August.
The Bank of Canada (BOC) is also expected to announce a reduction in bond purchases in the near future after reducing weekly purchases in April.
The US dollar index continued to add a 0.40% decline to the trading level of 92.389. For USD/EUR it has fallen to the level of 1.1823, after Powell's previous comments touched the highest level since April 5th.
Meanwhile, the kiwi surged against the dollar after New Zealand’s central bank announced it would cut its NZ $ 100 billion ($ 70 billion) bond -buying program. The currency added gains after Powell's comments by strengthening 1.4% higher
