By Chuck Mikolajczak
NEW YORK (Reuters) – The dollar fell slightly on Monday after comments from Federal Reserve Chairman Jerome Powell, while cryptocurrencies rose on bets that an assassination attempt on former President Donald Trump had boosted his re-election chances.
Trump has portrayed himself as a staunch supporter of cryptocurrencies, though he has not provided details of his proposed cryptocurrency policy.
After the shooting, investors narrowed the odds for a Trump victory. Online betting site PredictIt showed bets on Trump winning the election at 67 cents, down from 60 cents on Friday, and Joe Biden at 27 cents.
The dollar has been trending higher amid a so-called “Trump trade” in assets that are expected to do well under Trump, who is pursuing aggressive trade policies and looser regulations for some industries.
However, the initial reaction proved short-lived, with the dollar weakening from its previous highs.
The dollar also briefly fell sharply as Powell began his speech. He said three readings of U.S. inflation in the second quarter “raise some confidence” that the pace of price growth is returning to the Fed’s target in a sustainable manner, suggesting a move toward lower interest rates could come soon.
“The market is feeling confident and was confident before (Powell) talked about cutting rates in September, so I don’t think he’s actually put that on the table, but it’s clear that he is,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Powell could have made a stronger case that we’ve achieved a soft landing and now let’s avoid a hard landing. That’s the kind of logic that’s going to play out now.”
The exchange rate, which measures the U.S. dollar’s value against a basket of currencies, fell 0.07% to 104.22 after rising as high as 104.31, while the euro fell 0.09% to $1.0897. The pound weakened 0.22% to $1.2964.
Markets are fully pricing in a rate cut of at least 25 basis points (bps) by the Fed in September, after data last week showed consumer prices fell month-on-month in June for the first time in four years, according to CME’s FedWatch Tool.
Cryptocurrency prices rose, with bitcoin rising more than 6% to $63,808, after hitting a three-week high of $63,838.86. Ether rose more than 7% to $3,417.20.
The dollar was unchanged at 157.89 against the Japanese yen. The dollar fell to 157.15 during Powell’s speech, its lowest since June 17, before quickly rebounding.
The Bank of Japan (BoJ) is believed to have intervened in the market in another attempt to shore up the Japanese currency last week following a cooler-than-expected U.S. inflation report. Data from the central bank suggested authorities may have spent up to 3.57 trillion yen ($22.4 billion) to do so on Thursday.
“Anything that gives the BOJ hope that the Fed will cut rates more or faster than previously expected will give the yen a boost,” said Helen Given, a currency trader at Monex USA in Washington. “It’s all about interest rate differentials, so the Fed’s futures moves will be very impactful for the yen.”
