The king of the U.S. dollar plunged sharply after being impacted by Federal Reserve (Fed) Chairman Jerome Powell’s dovish remarks at Jackson Hole’s annual economic symposium last Friday.
Powell hinted the central bank would likely start reducing bond purchases by the end of the year, but gave an indication that this reduction would not lead to a direct interest rate hike.
The Fed will continue to keep interest rates at current levels until the economy reaches conditions consistent with maximum employment, and inflation has reached its target as well as being on track above 2% for some time.
In addition, he also mentioned the contagion of delta variants of concern, saying they would carefully evaluate future data and risks.
While the Fed’s dovish stance is to be expected, but the market reacted enormously. The US stock market rose higher, while the US dollar plunged lower.
In the Asian session, the dollar index that measures the strength of the greenback dollar traded at a two-month low of 92.60, after falling about 0.4% in late trading last week.
The plunge pushed the euro higher above 1.1800, and the pound strengthened to 1.37680 after gaining 0.4% against the US dollar.
On the other hand, the Aussie and New Zealand dollars also surged higher with both recording weekly gains of over 2%, the largest against the USD in 10 months.
The market focus this week shifted to the publication of the US NFP jobs report which is expected to continue to show improvement but more slowly than the previous reading.
