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The dollar boosted by the words of the President of the Fed



(New York) The dollar jumped on Tuesday after remarks by the president of the American central bank (Fed), who showed himself determined to raise rates more than expected in order to fight against inflation.

Around 3 p.m. (Eastern time), the greenback climbed to its highest since November against the British pound (+1.61% to 1.1832 dollars for one pound) and since October against the Canadian dollar (+ 1.04% to 1.3757 Canadian dollars to the dollar).

It also took 1.18% against the euro, at 1.0555 dollars for one euro.

The greenback jumped as Jerome Powell “showed openness to a faster rate hike,” Convera’s Joe Manimbo summed up in a note.

When a central bank increases its key rates, this increases the return on investments made in its currency and therefore tends to attract more investors.

The Fed had slowed down its rate hikes in early February, opting for a 25 basis point hike.

But “the most recent economic data is stronger than expected, which suggests that the final level of interest rates will likely be higher than expected,” said the Fed Chairman before a Senate committee.

In other words, the main key rate of the Fed could exceed 5.1%, the maximum rate that was anticipated by the institution in December.

And rates could stay high “for a while,” warned Jerome Powell.

The markets are now mostly expecting a rate hike, currently between 4.50% and 4.75%, of 50 basis points at the next meeting of the Fed’s Monetary Policy Committee.

Brokers will be able to refine their predictions further after the release of US jobs data for February on Friday.

Elsewhere in the world, several central banks are meeting this week.

The Central Bank of Australia (Reserve bank of Australia or RBA) opened the ball on Tuesday by raising its rates for the tenth consecutive time, to 3.6%.

“The tone of the bank is in our opinion more ‘dove’ (supporter of a flexible monetary policy, Editor’s note), because the RBA has stressed that growth is slowing and will remain weaker for a few years, even if it warns that it will probably have to raise rates further,” said Barclays analyst Shreya Sodhani.

As a result, the Australian dollar fell 0.80% to 1.4978 Australian dollars to the US dollar, its lowest level since December.

After the RBA, the Bank of Canada will meet on Wednesday and the Bank of Japan on Thursday.

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