Dollar Down as Fed Officials’ Comments Diminish Inflation Worries By

Dollar Edges Down, But Near Multi-Month Highs Over Signs of Economic Recovery

© Reuters.

By Gina Lee – The dollar was down on Tuesday morning in Asia as comments from U.S. Federal Reserve officials eased investors’ worries about runaway inflation.

The that tracks the greenback against a basket of other currencies edged down 0.11% to 89.743 by 12:44 AM ET (4:44 AM GMT).

The pair was steady at 108.73. Japan is planning to extend its state of emergency as the number of COVID-19 cases in the country rises, with the U.S. State Department upping its travel advisory for Japan to level four.

The pair inched up 0.07% to 0.7757. Melbourne has restricted gatherings as Australia’s second-largest city deals with its latest COVID-19 outbreak.

The pair edged up 0.14% to 0.7225. is due to hand down its policy decision on Wednesday, with some investors already betting that the central bank may begin to project rate rises.

The pair inched down 0.10% to 6.4115 and the pair edged up 0.17% to 1.4179.

U.S. Federal Reserve officials, including Governor Lael Brainard, Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard, insisted that any inflation was transitory.

“I think there will come a time when we can talk more about changing the parameters of monetary policy, I don’t think we should do it when we’re still in the pandemic,” said on Monday.

Meanwhile, the , released on Monday, read a lower-than-expected 0.24 in April, easing investors’ worries about the change of the Fed’s dovish monetary policy.

“Markets appear to be coming around to the Fed narrative that a burst in inflation is only likely to be temporary,” Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:), told Reuters.

“A temporary spike in prices should not instigate a removal of stimulatory policies from central banks,” he added.

Investors are now focused on how inflation will impact central banks’ policy decisions moving forward.

“The whole world is in a wait-and-see mode,” Stuart Oakley, head of cash currency trading at Nomura, told Reuters.

“The next few months are going to be so pivotal for FX, purely based on when the Fed starts talking about tapering, and that is 100% down to how the data is going to pan out this month and next month,” he said. “The minute we get so much as a suggestion that some of that stimulus (has) moved, then everything’s going to change drastically.”

Oakley has trimmed his own trading as uncertainty grows.

Investors now await further data, including the , due to be released on May 28.

On the cryptocurrency front, bitcoin rose to $39,600 on Tuesday as markets steadied after the volatility of the past few days.

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