Early trade in New York: Dollar gains after Fed takes inflation target

NEW YORK: The US dollar gained on Thursday in choppy trading after Federal Reserve Chairman Jerome Powell said, as widely expected, that the US central bank would roll out an aggressive new strategy to lift US employment and inflation.

Under the new approach, the US central bank will seek to achieve inflation averaging 2% over time, offsetting below-2% periods with higher inflation “for some time,” and to ensure employment does not fall short of its maximum level.

“The market expected most of this,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

There are doubts about whether the Fed will be able to lift inflation, despite the new target.

The dollar index initially sank on the announcement, before rebounding to last be up 0.53% on the day at 93.31.

The euro fell 0.51% to $1.1769.

Longer-term, if the Fed is able to increase price pressures but also leave rates near zero for longer, the policy would be negative for the dollar.

The British pound reached an eight-month high of $1.3283 against the greenback earlier on Thursday, before falling back to $1.3170.