Dollar edges up after US consumer confidence, Fed Powell's testimony

NEW YORK: The dollar gained against most currencies on Tuesday, boosted by strong US consumer confidence data and comments on the economy from Federal Reserve Chairman Jerome Powell that were in line with market expectations.

The greenback gained against the euro, Swiss franc, as well as the Australian and Canadian dollars.

In prepared testimony released in advance of a hearing before the US Senate Banking Committee, Powell said the Fed will remain "patient" in deciding on further interest rate hikes, reaffirming the policy shift made by the US central bank in January.

This the first of Powell's two-day appearance before the US Congress.

"Powell wasn't more dovish than what we saw in January, but he's certainly less hawkish than he was last year," said Erik Nelson, currency strategist, at Wells Fargo Securities.

"The thing is, the market has already priced in this seismic shift from the Fed toward a more neutral or more data-dependent stance."

Money markets have ruled out any more rate hikes for the remainder of the year with an 80 percent probability of a rate cut by January 2020.

The dollar overall also benefited from a jump in the US consumer confidence index for February to 131.4, from a revised 121.7 reading in January.

Jim O'Sullivan, chief US economist at High Frequency Economics said the rebound in confidence was "likely helped by the end to the shutdown and the rebound in equities."

"The report continues to signal a fairly healthy labor market," he added.

In late morning trading, the dollar index, a measure of its value against a basket of other currencies, was little changed at 96.398, after earlier hitting a three-week trough of 96.253.

The dollar was slightly higher versus the euro at $1.1356 , and rose 0.1 percent versus the Swiss franc to 1.0013 .

Against the yen, however, the dollar was down 0.2 percent versus the yen at 110.80.

A report showing US housing starts falling to a more than two-year low in December did not initially help the dollar's cause, further affirming expectations that Powell will maintain his dovish views.

Improving risk appetite was more evident in the British pound after media reports said Prime Minister Theresa May was considering delaying the March 29 deadline for the UK's exit from the European Union.

"With political risk, if you can delay it or remove the prospect of a no-deal Brexit, it will always be met with optimism and a rally in the currency," said Wells Fargo's Nelson.

The pound was last up 0.7 percent on the day at $1.3182 .