US dollar fell back below 93 levels on Friday as investors have started showing concerns over Federal Reserve’s new monetary policy that is likely to lift inflation. Fed Chairman Jerome Powell said Central bank’s policy of improving the employment numbers could negatively impact inflation numbers in the coming days.
“Following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time,” Powell said in remarks to the Kansas City Fed’s annual Jackson Hole research conference.
The investors have also been showing doubts over the Fed’s ability to reach the inflation target. This is because the Fed failed to achieve its targets in the past years.
“The Fed hasn’t achieved its inflation targets since 2012, and so now they’re saying now we’re serious about it … don’t think that’s what creates inflation, or really the inflation expectations,” Chandler said.
The US dollar index plunged to 92.65 level in early Asian trade on Friday after trading above 93 levels on Thursday. The USD index has recently hit twenty-seven months low due to concerns over US economic recovery.
The Fed chairman has also hinted that the central bank is not planning to lift the interest rate until they achieve certain employment goals. The Fed has recently slashed interest rates to zero levels to help people in the economic crisis.
“You’re going to see that interest rate differential not be in the dollar’s favor. It’s just providing a longer-term bearish outlook for the greenback,” Moya said.
Euro, on the other hand, stabilized against the US dollar as the common currency continues trading in the range of 1.18.
The British pound also rallied against the greenback on Thursday and extended the momentum into Friday trading. The pound is currently trading around an eight-month high of 1.3283 against the US dollar.