By Karen Brettell
NEW YORK (Reuters) – The dollar was steady on the day but down from three-month highs reached earlier on Wednesday after Federal Reserve Chairman Jerome Powell offered no major surprises on his second day of testimony before Congress and as investors waited for jobs data on Friday.
Powell reaffirmed his message of higher and potentially faster interest rate hikes, but emphasized that debate was still underway, with a decision hinging on data to be issued before the U.S. central bank’s policy meeting in two weeks.
“Not much from Powell has changed the stronger trajectory for the dollar,” said Joe Manimbo, senior market analyst at Convera in Washington. “The market now is just gearing up for payrolls on Friday and inflation next week to see whether or not the Fed is on track for the bigger 50 basis point rate hike later this month.”
The dollar jumped on Tuesday after Powell said on Tuesday that the Fed will likely need to raise interest rates more than expected in response to strong data and is prepared to move in larger steps if the “totality” of incoming information suggested tougher measures were needed to control inflation.
That prompted traders to reprice their rate expectations. Fed funds futures traders now see a 70% probability of a 50 basis-point hike at the Fed’s March 21-22 meeting, up from around 22% before Powell spoke on Tuesday. The rate is now expected to peak at 5.69% in September.
Investors are focused on February jobs data due on Friday for confirmation that continued strong jobs growth supports bigger rate increases. The dollar has jumped since data on Feb. 3 showed that employers added 517,000 jobs in January.
Economists are projecting job gains of 203,000, while wages are expected to rise 0.3% for the month and 4.8% on an annual basis.
The ADP National Employment report on Wednesday showed that private employment increased by 242,000 jobs last month. Other data showed that U.S. job openings fell less than expected in January and data for the prior month was revised higher.
Consumer price inflation data on Tuesday will also be key to whether the Fed reaccelerates the pace of rate increases. It is expected to show that prices rose by 0.4% in February.
The dollar index was last unchanged on the day against a basket of currencies at 105.63, after earlier reaching 105.88, the highest since Dec. 1. It is up from a nine-month low of 100.80 on Feb. 1 but remains well below a 20-year high of 114.78 reached on Sept. 28.
“The dollar had a big four-month selloff and I think that so far it still looks corrective in nature, that is I don’t think that we’re going to go back and retest the September and October dollar highs,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
The euro was little changed at $1.0547. It fell to $1.0524 earlier and is trading just above this year’s low of $1.04820 reached on Jan. 6.
The dollar rose 0.09% to 137.28 yen, after earlier reaching 137.90, the highest since Dec. 15. Sterling gained 0.09% to $1.1840, after earlier falling to $1.1805, the lowest since Nov. 21. The Aussie was up 0.07% at $0.6588, after reaching $0.6568 earlier, the lowest since Nov. 10.
The Canadian loonie fell after the Bank of Canada left its key overnight rate on hold at 4.50%, as expected, becoming the first major central bank to suspend its monetary tightening campaign in the face of an anticipated easing of high inflation. The greenback was last up 0.34% against the Canadian currency at $1.3799 Canadian dollars.
Currency bid prices at 2:31PM (1931 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 105.6300 105.6500 +0.00% 2.068% +105.8800 +105.3500
Euro/Dollar $1.0547 $1.0548 +0.01% -1.55% +$1.0574 +$1.0524
Dollar/Yen 137.2800 137.1550 +0.09% +4.71% +137.9050 +136.4750
Euro/Yen 144.80 144.68 +0.08% +3.21% +145.2300 +144.2500
Dollar/Swiss 0.9409 0.9422 -0.11% +1.79% +0.9438 +0.9388
Sterling/Dollar $1.1840 $1.1827 +0.09% -2.12% +$1.1858 +$1.1805
Dollar/Canadian 1.3799 1.3755 +0.34% +1.87% +1.3815 +1.3745
Aussie/Dollar $0.6588 $0.6585 +0.07% -3.33% +$0.6629 +$0.6568
Euro/Swiss 0.9924 0.9936 -0.12% +0.29% +0.9943 +0.9910
Euro/Sterling 0.8907 0.8916 -0.10% +0.71% +0.8923 +0.8897
NZ $0.6107 $0.6107 +0.00% -3.82% +$0.6137 +$0.6086
Dollar/Norway 10.6720 10.6920 -0.11% +8.82% +10.7170 +10.5980
Euro/Norway 11.2556 11.2701 -0.13% +7.26% +11.3018 +11.1995
Dollar/Sweden 10.7134 10.7242 -0.12% +2.94% +10.7608 +10.6554
Euro/Sweden 11.3010 11.3142 -0.12% +1.36% +11.3385 +11.2520
(Reporting by Karen Brettell; Editing by Nick Macfie and Alison Williams)