Peter Nurse

Investing.com. The dollar edged lower Wednesday following strong gains in the preceding session. This was after Fed Chair Jerome Powell said that the U.S. central banking is likely speed up its tapering of asset purchases.

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded 0.1% lower at 95.970 at 2:55 PM ET (755 GMT). This was after it had seen its largest monthly increase since November, when it saw the possibility that U.S. interest rates would be raised sooner than expected.

After dropping as low as 1.1258 Tuesday, the index rose 0.1% at 1.1337. The risk-sensitive index grew 0.4% to 0.75151 after rebounding from its one-year low.

The Federal Reserve’s Jerome Powell was the driving force behind the dollar gains. He presented them to the Senate Banking Committee Tuesday.

Powell stated that the economy was strong at this time and the inflationary pressures were higher. He suggested it was appropriate to wrap up taper of asset purchases “a few months sooner” and also said it was time for Powell to say “retirement” when discussing high levels in inflation.

At its November meeting the Fed stated that it would cut bond purchases by $15Billion per month. This would allow the Fed to accelerate its decision. It will likely speed up the period when it feels more confident about raising benchmark interest rates. 

On the heels of the sudden onset of the Covid-19 virus omicron, the dollar was hit early in the week. 

Powell’s testimony continues later on Wednesday, while the release of the will also be in the spotlight ahead of Friday’s official monthly jobs report.

Other currencies rose 0.1%, to 6.3661, after falling to a 6-month low of 6.3596. The pair had previously fallen to 6.3596. However, the yuan was resilient following the release of improved-than expected official manufacturing PMI data. The Korean won also hit a two-week high after stronger-than-expected trade data, the two data releases showing that global manufacturing remained in rude health last month.

fell 0.1% to 13.4557, with the lira edging higher after falling to a record low on Tuesday as Powell’s comments compounded concerns over President Recep Tayyip Erdogan’s drive for lower borrowing costs despite raging inflation.