By Peter Nurse
Investing.com - The dollar traded largely flat in Europe Thursday, remaining near four-week lows with traders seemingly buying into the idea that the Federal Reserve will keep interest rates at rock bottom levels for some time.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was flat at 91.657, after dipping to the lowest level since March 18 at 91.558 in the Asian session.
USD/JPY was flat at 108.92, after hitting a three-week low of 108.75 on Wednesday, EUR/USD edged lower to 1.1976, after climbing as high as a four-week top of 1.1990, GBP/USD was flat at 1.3778, while the risk-sensitive AUD/USD rose 0.1% to 0.7722.
Federal Reserve Jerome Powell continued Wednesday to hammer home the central bank’s mantra that the ultra easy monetary policies were going anywhere soon at a virtual event organized by the Economic Club of Washington.
Powell said it is "highly unlikely" the central bank would lift rates before 2022 and reiterated that the pace of monthly bond purchases would remain steady until the economy has reached its goals.
The Fed's ongoing $120 billion bond purchase program would likely be reined in well before a rake hike, Powell added.
“Despite the upside surprise to U.S. CPI ... the reaction in markets was well behaved and to some extent surprising – lower USD and lower UST yields,” said analysts at ING, in a note. “This likely indicates that U.S. inflation and growth stories are in large part priced in, the market doesn’t expect the Fed to overreact.”
The U.S. consumer price index jumped 0.6% in March versus the previous month, the largest gain since August 2012, and rose 2.6% from a year earlier, well above the Fed’s 2.0% long-term target.
The yield on the benchmark 10-year U.S. Treasury note stood at 1.63%, substantially below the 1.78% level seen at the end of March when expectations were running rife that rocketing inflation would prompt the Fed to act more quickly than had previously been envisaged.
Elsewhere, USD/TRY rose 0.2% to 8.0822, with Sahap Kavcioglu, Turkey's fourth central bank chief in less than two years, set to oversee his first policy decision later Thursday after his shock appointment last month.
Turkey’s central bank is expected to leave its benchmark interest rate, now at 19%, unchanged. However, Kavcioglu is seen as being under pressure to reduce rates, particularly after the previous governor, Naci Agbal, was fired just two days after he had presided over a hike in its benchmark one-week repo rate of 200 basis points to combat inflation and protect the currency.
USD/RUB rose 1.6% to 77.112, with the ruble sinking on reports the U.S. will announce sanctions on Russia as soon as Thursday for alleged election interference and malicious cyber activity. That overshadowed the announcement that U.S. President Joe Biden will hold talks with his Russian counterpart Vladimir Putin. Russia's military buildup on the Ukrainian border has raised fears of a fresh invasion of Ukraine, seven years after Russia annexed Crimea and sponsored an armed revolt in the east of the country.