Dollar Falls as Tariff Concerns Ease, Fed's Powell Stays Patient on Rate Cuts
The U.S. dollar fell on Tuesday as Federal Reserve Chair Jerome Powell said the U.S. central bank was in no rush to cut its short-term interest rate again and as traders waited on more concrete information regarding potential trade tariffs by U.S. President Donald Trump.
Powell said in testimony before the Senate Banking, Housing and Urban Affairs Committee that the view on rates reflected the U.S. economy being "strong overall," with low unemployment and inflation that remains above the Fed's 2% target. The comments were largely expected by traders.
He also told lawmakers the argument for free trade still makes sense but added that it was not the role of the Fed to comment on tariff or trade policy but to react to how it impacts the economy.
Traders are becoming more immune to news around potential tariffs, which have unnerved investors on concerns about how they may impact inflation and growth.
Futures priced in 36 basis points worth of Fed rate cuts by the year-end , little changed from before Powell's comments, which implies one 25-bp cut and only a partial chance of a second.
Powell will also testify before the House Financial Services Committee on Wednesday.
Consumer price data for January due on Wednesday is this week's main U.S. economic release and is expected to show inflation remained sticky during the month.
The U.S. dollar index was last down 0.37% on the day at 107.96.
Tariffs are likely to remain a key focus for traders on any signs that trade tensions are intensifying.
Trump on Monday said he would announce plans to impose reciprocal tariffs on other countries over the next two days, doubling down on comments he made on Sunday.
On Sunday Trump said he would introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties.
The European Union said it would respond with "firm and proportionate countermeasures".
The euro was last up 0.49% at $1.0357.
The Canadian dollar strengthened 0.14% versus the greenback to C$1.43 per dollar, bouncing back from earlier losses.
Canada, Brazil, Mexico, South Korea and Vietnam are the biggest sellers of steel into the U.S., according to American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminum.
The Japanese yen weakened 0.3% against the greenback to 152.45 per dollar. It hit 150.93 on Friday, its highest since December 10.
The Australian dollar rose 0.29% versus the U.S. currency to $0.6293.
Australian Prime Minister Anthony Albanese said on Tuesday Trump has agreed to consider exempting Australia from his steel and aluminum tariffs, in what Albanese called a constructive phone call with the U.S. president.
In cryptocurrencies, bitcoin fell 2.26% to $95,204.76.
Source : Reuters
