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Dollar Downward Spiral Continues as Trump Blasts Powell's Rate Hikes

2018-8-22 10:06:14Basics of Trading
Dollar Downward Spiral Continues as Trump Blasts Powell's Rate Hikes

The dollar was lower against its rivals Tuesday after U.S. President Donald Trump criticized the Federal Reserve chairman Jerome Powell for raising interest rates.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.40% to 95.31, a nearly two-week low.

In an interview with Reuters on Monday, Trump said he was "not thrilled" with Jerome Powell's rate hikes and called on the U.S. central bank to do more to boost the economy.

The dollar retreated on the comments despite many expecting it unlikely that Powell would succumb to pressure from the Trump administration to halt the pace of rate hikes.

The Federal Reserve has projected four hikes for this year, with the third rate hike expected as soon as September.

The slump in the dollar helped the euro add to gains, which had followed a firmer Turkish Lira and a decrease in Italian bonds yields to below 3%, pointing to easing concerns somewhat about Italy's upcoming budget.

Italy's new populist government has promised to deliver a big spending plan, but market participants are sceptical as to how the country will be able to finance those plans. Moody's delayed its decision to downgrade Italy's debt on Monday, lifting sentiment.

EUR/USD rose 0.49% to $1.1538.

Risk-on sentiment, meanwhile, reduced demand for safe-haven yen, which continued to lose ground against the greenback.

USD/JPY rose 0.36% to Y110.47 from an intraday low of Y109.78.

GBP/USD rose 0.57% to $1.2869 despite Michel Barnier telling reporters Tuesday the EU would not change its “principles” in order to strike a Brexit deal.

USD/CAD fell 0.08% to C$1.3035 as firmer oil prices supported the loonie, stifling the pair's move higher.