FOREX-Dollar falls as Fed’s Powell reiterates disinflation comments. This is seen as less-hawkish

(Adds comment, prices updates) By Gertrude Chavez – Tuesday’s dollar drop was a result of U.S. Federal Reserve Chairman Jerome Powell’s double down on last week’s statements that disinflation had started. He stated that he expected significant inflation declines this year. Powell did not change to a hawkish stance in spite of the U.S. Non-farm Payrolls Report, which was a huge success and led investors to believe that the Fed will not tighten further than what the market has priced in. The greenback fell across the board due to losses against the yen and Swiss franc as well as the Australian dollar and New Zealand dollars. In a question and answer session at the Economic Club of Washington the Fed chief stated that the return to the U.S. central banking’s inflation goal of 2 percent would be a slow process and would require additional rate increases. Powell refused to associate the surprise strength in the employment market, as reported in the January employment reports, with the expectation that interest rates will need to be higher, than what Fed officials predicted in late 2013. U.S. job report Friday wrongfooted traders, who were betting on a Fed rate-hike slowdown and gave the dollar a boost. “Powell had the opportunity to signal an aggressive shift, but he did not take it,” said Bill Adams (chief economist at Comerica Bank) in a research note following remarks from the Fed’s top official. “The Fed will likely continue to make at least one or two more hikes in the near term before putting the brakes on. After Powell’s comments, the dollar index, which measures performance against six currencies, fell to its lowest session level. It fell 0.2% to 103.39 U.S. interests-rate futures. Markets expect that the Fed funds rates will reach a peak of just above 5.1% by June. This contrasts with Friday’s jobs report, which expected a peak lower than 5%. The euro was little changed in afternoon trading against the dollar at $1.0719, after falling to a low of $1.0670 five weeks ago. After rising to a one month high on Monday, the dollar fell 1.2% against the yen to 130.7 yen. Nikkei reports that Japan’s government has called out Bank of Japan (BOJ), deputy Governor Masayoshi Aamiya to succeed Haruhiko Kuroda as central banking governor hit the yen. Amamiya seems more optimistic than other potential candidates. After falling to $1.1974 for the previous session, Sterling rose 0.1% against $1.2035. Investors will be looking for more commentary from central bankers this coming week, following the dovish outcome of last week’s Bank of England meeting. After rising as high as 1% following the increase in cash rates by the central bank of Australia, 0.9% was seen in the Australian dollar at US$0.6943. This is a more hawkish outcome than many expected. ======================================================== Currency bid prices at 3:12PM (2012 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index 103.4800 103.6000 -0.11% -0.010% +103.9600 +102.9900 Euro/Dollar $1.0713 $1.0726 -0.13% -0.02% +$1.0767 +$1.0670 Dollar/Yen 131.1900 132.6300 -1.08% +0.07% +132.7000 +130.4700 Euro/Yen 140.53 142.24 -1.20% +0.17% +142.3300 +140.2900 Dollar/Swiss 0.9231 0.9285 -0.59% -0.18% +0.9289 +0.9194 Sterling/Dollar $1.2027 $1.2022 +0.03% -0.56% +$1.2094 +$1.1962 Dollar/Canadian 1.3417 1.3446 -0.21% -0.97% +1.3469 +1.3382 Aussie/Dollar $0.6937 $0.6883 +0.78% +1.76% +$0.6988 +$0.6882 Euro/Swiss 0.9888 0.9956 -0.68% -0.08% +0.9958 +0.9873 Euro/Sterling 0.8904 0.8921 -0.19% +0.68% +0.8940 +0.8898 NZ $0.6314 $0.6305 +0.12% -0.59% +$0.6358 +$0.6274 Dollar/Dollar Dollar/Norway 10.3405 10.3400 -0.06% +5.30% +10.4305 +10.2950 Euro/Norway 11.0793 11.0847 -0.05% +5.58% +11.1526 +11.0571 Dollar/Sweden 10.5923 10.6244 -0.38% +1.77% +10.6726 +10.5347 Euro/Sweden 11.3473 11.3901 -0.38% +1.77% +11.4052 +11.3377 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Susan Matthew; Editing by Marguerita Choy)

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