Dollar Suffers Losses After Dovish Comments from Powell

The dollar hovered near a one-week low on Wednesday, June 23, after officials from the U.S. Federal Reserve, including Chairman Jerome Powell, reaffirmed that a tighter monetary policy is still some way off following a surprising shift towards a more hawkish tone from the committee last week. The dollar surged and stocks fell last week after the U.S. central bank caught markets off guard by signaling interest rate hikes sooner than previously expected by investors. However, policymakers have since softened their stance, with Powell and New York Fed President John Williams warning that economic recovery requires more time before tapering stimulus and that higher borrowing costs should be appropriate. Powell stated during a hearing before a committee of the U.S. House of Representatives, "We will not raise interest rates preemptively because we fear the potential beginning of inflation. We will wait for evidence of actual inflation or other imbalances." The dovish comments have contributed to the dollar's losses this week, with the dollar giving up a third of its gains since last Wednesday. Against a basket of currencies, the dollar remained stable at 91.772, lingering near its lowest levels since June 17 and nearly a third lower than its two-month high reached last week. The Japanese yen was the only notable loser against the dollar after data showed factory activity grew at its slowest pace in four months in June amid a quick contraction in production. The euro remained stable at 1.19365 dollars.