On Wednesday, June 23, the USD climbed in early European trade after its overnight weakness.
This was after the US Federal Reserve Chief Jerome Powell reiterated in Congress that the central bank will gradually tighten its monetary policy.
The US Dollar Index that trails the greenback in opposition to its six rival currencies rose 0.13% to 91.873.
Currently, it is off a two-month high mark at the end of the previous week.
The North American currency has now lost track of about a third of its gains since the Fed sparked an unexpectedly hawkish tone in its latest policy decision.
The USD/JPY pair increased 0.15% to 110.8 as the Bank of Japan released the minutes from its monetary policy meeting earlier in the day.
In addition, the Japanese government delivered both its manufacturing and service purchasing managers’ index for June.
On the other hand, the AUD/USD, NZD/USD, and USD/CNY all traded lower by 0.13% at 0.7544, 0.23% at 0.7006, and 0.01% at 6.4806, respectively.
Consequently, GBP/USD also plummeted 0.11% to 1.3931 as investors await the Bank of England’s policy decision on Thursday.
Moreover, EUR/USD also plunged 0.2% to 1.919 following a rebound of $1.1847 last week.
Traders expected the euro to reach a third consecutive day of gains as PMI data showed that eurozone business growth climbed at its fastest pace in 15 years in June.
This was followed by the easing of more pandemic curbs in the region.
Elsewhere, the USD/HUF traded 0.3% higher to 293.86 following the National Bank of Hungary lifting its base rate by 30 basis points to 0.9%.
Fed Chair’s Congress Testimony
The Fed Chairman held on to his previous statement as he testified in Congress last Tuesday.
He acknowledged that the price hike recently seen in the economy was bigger than expected but he reiterated that it will possibly subside.
Another Fed official said that the discussion about the interest rate hikes is still some way off.
An analyst said that these types of statements did not make the central bank’s timetable for tightening its monetary policy any clearer.
Also, it disappointed some USD bulls who are looking for a lead towards an early move given Fed’s hawkish stance.
According to an analyst, the US dollar bulls’ only comfort is San Francisco Fed President Mary Daly’s statement of substantial further progress in the recovery.
This made the Fed create a precondition for starting to tighten its policy within this year’s reach.