Early trade in New York: Dollar slips after Powell downplays inflation fears

NEW YORK: The dollar retreated on Wednesday after Federal Reserve Chair Jerome Powell on Tuesday said that rising inflation is likely temporary and showed no signs of being in a hurry to tighten monetary policy.

The dollar jumped after the Fed surprised markets on June 16 by saying that policymakers are forecasting two interest rate hikes in 2023.

But Powell on Tuesday said that prices are rising due to a “perfect storm” of rising demand for goods and services and bottlenecks in supplying them as the economy reopens from the pandemic and that those price pressures should ease on their own.

“Dollar gains have faded after Mr. Powell downplayed higher inflation lasting for very long,” said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

The dollar index was last down 0.21% at 91.551. It fell to a session low after data showed that a measure of US factory activity climbed to a record high in June.

The euro rose 0.18% to $1.962.

The Japanese yen also fell after data showed factory activity expanded at the slowest pace in four months in June.

The dollar gained 0.11% to 110.77 yen, after earlier reaching 111.10 yen, the highest since March 2020.

Elsewhere, bitcoin was up around 5% on the day, above the $34,000 mark after dropping to as low as $28,600 on Tuesday - its lowest since January.