(Bloomberg) -- The dollar is sliding against nearly all other major currencies as Federal Reserve Chair Jerome Powell reiterated his plans for monetary policy — and as higher oil prices boosted commodity producers.
- Powell reiterated that rate cuts are likely this year
- Australian dollar, Swedish krona outperformed G-10 peers
A Bloomberg gauge of the dollar fell as much as 0.5% on Wednesday, the most in more than a month, after Powell repeated to US lawmakers that interest-rate cuts are likely this year, as long as inflation data continue to show improvement. Economic data in the US also failed to spur demand for the greenback, leaving the currency to drift lower for a fourth-straight trading session.
“The dollar is weakening because of the absence of more good news,” said Helen Given, a foreign-exchange trader at Monex.
The Australian and Swedish currencies both rose more than 1% against the dollar during the session. The loonie rallied to a one-week high after Bank of Canada officials kept the policy rate steady signaled it was too early to consider easing. Oil prices also ticked higher.
Optimism surrounding the dollar has been fading after it gained more than 2.5% in January and February. For the first time since 2020, options that protect against greenback losses in a one-month period are more expensive in volatility terms than those hedging gains, suggesting that traders are more concerned about a slide.
Due to the “lack of surprise” from Powell on Wednesday, US Treasury yields dropped lower, weighing on the dollar, according to Citigroup Global Markets strategist Daniel Tobon.
Despite its haven status, the greenback also saw limited benefit amid a selloff in US regional bank shares after New York Community Bancorp had to raise equity capital.
Investors are now looking ahead for the next potential dollar drivers. Data on Friday may point to a slowly cooling labor market, even if wage growth proves to be resilient. Traders also expect an inflation report March 12 to shed more light on whether inflationary pressures are easing.
