Investing.com – The U.S. dollar steadied on Thursday after falling sharply overnight after Federal Reserve Chairman Jerome Powell ruled out a rate hike, while the Japanese yen was volatile amid talk of intervention.
At 0600 ET (1000 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 105.645, after falling 0.6% overnight.
Powell rules out further rate hikes
Interest rates remained unchanged at the latest policy-setting meeting on Wednesday, as widely expected, as the Fed chairman acknowledged that the fight against inflation is taking longer than expected.
However, he largely ruled out the possibility of raising interest rates this year, which surprised dollar bulls given recent stronger-than-expected inflation data.
“While the Committee added a hawkish acknowledgment of ‘no further progress’ on inflation this year to its statement, Chairman Powell delivered a peaceful message at his press conference,” Goldman Sachs economists said in a note.
“We have left our forecast unchanged and continue to expect two rate cuts this year, in July and November,” they added.
Economic data will now be scrutinized even more closely as Powell stressed the need for data dependence, with weekly data to be released later in the session.
However, the first key data will come on Friday when the US jobs report will be closely watched.
the number is expected to rise by 243,000 in April, down from just over 300,000 in the previous month but still indicating a healthy labor market.
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Eurozone output still weak
In Europe, shares traded 0.1% lower at 1.0699 after data showed the euro zone’s manufacturing sector remained in the doldrums.
S&P Global’s latest eurozone index fell to 45.7 in April from 46.1 in March, below the 50 mark and marking its 22nd month of rising activity.
The bloc’s economy recovered from a mild recession last quarter to grow 0.3% quarter-on-quarter in January-March, official data showed earlier in the week, but further growth is unlikely for the region’s manufacturing sector any time soon.
traded 0.1% lower at 1.2509, trading in a tight range, with the next economic data release due on Friday.
The figure is expected to rise to 54.9 in April from 53.1 in the previous month, indicating that the UK’s dominant services industry remains healthy, potentially giving the Bank of England room to delay interest rate cuts.
The yen is unstable; more interference at work?
In Asia, the pair rose 0.5% to 155.26, with the pair recovering slightly after it suddenly fell more than 3% on Wednesday from late Tuesday levels, prompting talk of additional intervention by Japanese authorities to support yen.
USDJPY fell from 160 on Monday, which traders said was a new sand line for Japan when it comes to yen weakness. But factors weighing on the yen – mainly the Bank of Japan’s accommodative approach and the wide gap between local and U.S. rates – are expected to remain in place, limiting the effect of government intervention.
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Asian currencies moved from flat to low, with the pair rising 0.1% to 0.6531, despite data showing the country’s currency fell to a more than three-year low in March.