FOREX

FOREX-Dollar mixed after Powell, pound hits three-year high – Yahoo Finance


* Dollar dips after Powell, roughly flat on the day

* Sterling hits fresh three-year high

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E(New throughout)

By Kate Duguid

NEW YORK, Feb 23 (Reuters) – The dollar reversed earliergains on Tuesday morning after a dovish speech from U.S.Federal Reserve chief Jerome Powell failed to quell inflationfears, while the British pound rose to fresh three-year highs.

The growing likelihood that Congress will pass President JoeBiden’s $1.9 trillion stimulus plan has raised concerns about apossible spike in inflation. The recent rise in inflationexpectations as investors bet on a post-pandemic economicrecovery and the so-called “reflation” trade has hurt the dollarthis month.

Powell’s speech on Tuesday did little to allay inflationfears. In remarks prepared for delivery to a Senate BankingCommittee, Powell said, “The economy is a long way from ouremployment and inflation goals, and it is likely to take sometime for substantial further progress to be achieved,” thehurdle the Fed has set for discussing when it might beappropriate to pare back support.

“The new fear of inflation – he did try to cap down theworry a little bit,” said John Doyle, vice president of dealingand trading at Tempus Inc.

But, he added, “I think is going to continue thatline about holding rates low for a long time. I think he’s goingto try to continue to be that reassuring voice for markets.Which is why we’ve seen a little bit of recovery in risk as hestarted to speak and the dollar dip.”

The dollar index was last at 90.115, 0.08% higher onthe day, but off session highs after the post-Powell dip.

Sterling hit a new nearly three-year high of $1.412, last up 0.33% on the day, as investors stuck withtheir bets that a rapid rollout of the COVID-19 vaccine wouldallow the British economy to reopen over the next few months.

Prime Minister Boris Johnson on Monday laid out astep-by-step plan for ending the current British lockdown.

“The pound made the most noise on a quiet night,” saidDoyle. In addition to the plans to end lockdowns, sterling hasbenefited in recent months from relief over Brexit andbetter-than-expected economic data, which diminished the chancesthe Bank of England would push interest rates below zero.

Elsewhere, the euro strengthened 0.07% to $1.216and the Japanese yen, the worst performing major currencyof 2021, remained down on the day despite the weakening in thedollar. The dollar was last up 0.02% at 105.09 yen.

(Reporting by Kate Duguid in New York and Tommy Wilkes inLondon; Editing by Steve Orlofsky)

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