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The U.S. dollar lost in late trading on Thursday, after Federal Reserve Chair Jerome Powell said the U.S. central bank would be “proceeding carefully” on further interest rate hikes.
The dollar index, which measures the greenback against six major peers, fell 0.29 percent to 106.2469 in late trading.
“Tight policy is putting downward pressure on economic activity and inflation,” Powell said during a discussion at the Economic Club of New York on Thursday. “A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little.”
He also indicated that soaring bond yields could help the Fed slow the economy, further cooling inflation and possibly signaling the end of rate hikes.
“Powell continued to leave optionality open for the Fed, in terms of future rate hikes, but did nothing to change the narrative that the Fed will keep rates unchanged at their next meeting and is relatively likely to keep them unchanged for the rest of this year as well,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
U.S. Treasury yield on the 2-year note which best reflects short-term interest rate expectations fell, while that on the 10-year note edged higher to 4.9215 percent, near the 5 percent level last seen in 2007.
“Is the 10-year going to breach 5 percent in yield? … I think the answer to that is yes, that it can in turn provoke even more volatility,” said Russell Hackmann, president of Hackmann Wealth Partners.
The number of Americans who applied for unemployment benefits last week fell to a nine-month low of 198,000 for the period ending Oct. 14, the U.S. Department of Labor said Thursday, defying expectations that layoffs would rise as higher U.S. interest rates pinched the economy.
In late New York trading, the euro rose to 1.0583 U.S. dollars from 1.0536 U.S. dollars in the previous session, and the British pound grew to 1.2145 U.S. dollars from 1.2144 U.S. dollars.
The U.S. dollar bought 149.8360 Japanese yen, lower than 149.8980 Japanese yen of the previous session. The U.S. dollar was down to 0.8933 Swiss francs from 0.8990 Swiss francs, and it rose to 1.3715 Canadian dollars from 1.3710 Canadian dollars. The U.S. dollar slid to 10.9557 Swedish krona from 11.0259 Swedish krona.