The DXY Index was hovering around 109.26, retreating from a new 20-year high of 109.48 reached earlier in the day.
The New Zealand dollar dropped to $0.6109, and the AUD plummeted to $0.6858.
The actions follow Powell’s declaration that the Federal Reserve has no intentions to modify its hawkish stance on interest rates and will keep raising borrowing costs at a constantly monitored Jackson Hole central bank forum.
He also cautioned that higher rates could hurt the US economy, warning that individuals and businesses might experience some hardship until skyrocketing consumer prices are contained. Bets that the Fed will increase borrowing costs by 75 bps in the coming month and that rates of much over 3% will result by the end of 2022 were increased as a result of Powell’s remarks.
The emphasis now switches to US payroll statistics that will be released later in the week. A positive report on the labor market might offer the Federal Reserve more leeway to continue tightening monetary policy at the present rate.
In other markets, the euro’s brief ascent over the greenback parity lost pace, with the currency trading at $0.9944 in the European session. The news that the European Central Bank (ECB) would consider boosting its benchmark interest rates by 75 bps at their upcoming meeting in the next month caused the euro to rise at the closing of the week before.
However, worries remain regarding the bloc’s capacity to withstand an impending energy crisis spurred on by this week’s unexpected repairs on a crucial gas supply route from Russia. The critical Nord Stream 1 pipeline, which is supported by Moscow, is anticipated to cease carrying natural gas to Europe sometime around August 31 and will resume operations 3 days later.
Last but not least, Bitcoin (BTC) fell to $19,821 in the cryptocurrency market by a total of 1.16% as investor attitudes for riskier assets dwindled in the aftermath of the remarks of the Fed Chair.