Dollar falls

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NEW YORK- The dollar fell on Friday, after two days of gains, as Federal Reserve Chair Jerome Powell struck a cautious tone on further interest rate moves, saying that the risk of under- or over-tightening is now more balanced.

The market viewed his comments as dovish, with investors pricing in expectations that the Fed is likely done raising rates.

Powell said it was clear that US monetary policy was slowing the economy as expected, with a benchmark overnight interest rate “well into restrictive territory.” Powell noted, however, that the Fed is prepared to tighten policy further if deemed appropriate.

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“Powell just gave the thumbs up to the other side of the camp believing that the Fed has acted correctly and can afford to wait-and-see without (hiking), but not necessarily cutting,” said Juan Perez, director of trading at Monex USA in Washington.

The US dollar index – which tracks the currency against six major counterparts – was last down 0.2 percent at 103.23 after ending November on Thursday with its weakest monthly performance in a year. It is poised to end lower for a third straight week.

Following Powell’s remarks, US rate futures on Friday priced in a 64 percent chance of a rate cut by the March meeting, compared to 43 percent late on Thursday, according to the CME’s FedWatch tool. For the May meeting, US rate cut chances surged to 90 percent , from about 76 percent the day before.

Powell’s remarks came after data showed the US manufacturing sector remained weak in November, affirming his comments that Fed rate hikes have started to slow the economy. -Reuters

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