Early trade in New York: Dollar declines as Powell says taper ‘a ways off’

NEW YORK: The US dollar fell on Wednesday after Federal Reserve Chair Jerome Powell said in remarks prepared for Congress that the economy was “still a ways off” from levels the central bank wanted to see before tapering its monetary support.

His comments came a day after data showed US inflation hit its highest in more than 13 years last month, which lifted the greenback to just shy of its three-month high and sharpened the focus on when central banks around the world will begin withdrawing pandemic-era stimulus.

That focus intensified on Wednesday after the Bank of Canada said it would cut its weekly bond purchases to C$2 billion ($1.6 billion) from C$3 billion, and the Reserve Bank of New Zealand said it was ending bond purchases, raising expectations it could increase rates as soon as August.

The dollar index declined after Powell’s comments, slipping 0.4% to 92.428. It had earlier risen as high as 92.832 - just below the 92.844 level reached last week for the first time since April 5.

Against the euro, it slipped 0.41% to $1.18245, having earlier touched its highest since April 5 off of Tuesday’s inflation reading.

The dollar rose almost 3% last month after the Fed’s hawkish pivot forced markets to re-assess when tapering and rate rises might start. It firmed 0.6% on Tuesday after the inflation data. The loonie was down 0.12% at 1.2502.