Markets
Dollar drops after Powell, cryptocurrencies climb as investors eye Trump victory
NEW YORK, July 15 (Reuters) – The dollar edged lower on Monday after comments from Federal Reserve Chairman Jerome Powell, while cryptocurrencies gained on bets that a assassination attempt on former President Donald Trump lifted his chances of re-election.Trump has introduced himself as a strong supporter of cryptocurrencies, although he did not give details of his proposed crypto policyIn the aftermath of the shooting, investors reduces the chances of a Trump victory. Online betting site PredictItNew tab, opens a new tab Bets on a Trump election victory were at 67 cents, up from 60 cents on Friday, with Joe Biden at 27 cents.
The dollar tends to strengthen as part of what is known as the “Trump trade,” a move in assets that are likely to perform well under a Trump presidency characterized by aggressive trade policies and looser regulation for certain sectors.
But the initial reaction proved short-lived, with the greenback falling from its previous highs.
The dollar also fell briefly as Powell began his speech. He said The three US inflation figures for the second quarter “add some confidence” that the pace of price increases is returning to the Fed’s target in a sustainable manner, indicating that a decision to cut interest rates could come soon.
“The market is feeling confident and it was before (Powell) talked about a rate cut in September, so I don’t think he’s really put it on the table, but it’s clearly on the table,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Powell could have argued more convincingly that we’ve had a soft landing and now we need to avoid a hard landing. That’s the kind of logic that’s going to come into play now.”
The dollar index, which measures the greenback against a basket of currencies, fell 0.07% to 104.22 from 104.31, while the euro was down 0.09% at $1.0897. Sterling was down 0.22% at $1.2964.
Markets are fully pricing in a rate cut of at least 25 basis points (bps) from the Fed in September, according to the CME FedWatch ToolNew tab, opens in a new tabafter last week’s data showed consumer price fell on a monthly basis for the first time in four years in June.
Cryptocurrency prices surged, with bitcoin up more than 6% to $63,808 after hitting a three-week high of $63,838.86. Ether jumped more than 7% to $3,417.20.
Against the Japanese yen, the dollar was unchanged at 157.89. The greenback fell to 157.15 as Powell spoke, its lowest level since June 17, before rebounding quickly.
The Bank of Japan (BoJ) is believed to have intervened on the market in another effort to support the Japanese currency last week after a weaker-than-expected rise US Inflation ReportCentral bank data suggests authorities may have spent as much as 3.57 trillion yen ($22.4 billion) to achieve this by Thursday.
“Anything that gives the Bank of Japan hope that the Fed might cut rates more or sooner than expected is going to be a boost to the yen,” said Helen Given, a forex trader at Monex USA in Washington. “It’s all about interest rate differentials, so moves in Fed futures are going to be very influential on the yen.”
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Reporting by Chuck Mikolajczak, with contributions by Gertrude Chavez-Dreyfuss; editing by Sharon Singleton and Richard Chang
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