NEW YORK- The US dollar rebounded against major currencies such as the euro and yen on Friday after Federal Reserve Chairman Jerome Powell acknowledged the repercussions of larger-than-expected US tariffs and signaled a cautious tone on future easing.
Powell said tariffs increased the risk of higher inflation and slower growth, highlighting the difficult path ahead for policymakers at the US central bank.
The Australian dollar, meanwhile, seen as a liquid proxy for the yuan, hit five-year lows against the greenback after China announced additional tariffs on US goods on Friday.
“This is a bit of a more hawkish reaction that he’s focusing on the inflationary impact of tariffs. The US economy has been dealing with higher inflation, and because the US is the one doing the tariffs and it will apply to all imports, it’s likely to have more impact on the US ,” said Peter Vassallo, FX portfolio manager at BNP Paribas Asset Management.
“The inflationary concerns are real, and this makes sense as we think about the fact that inflation, for five years now, has been running above target.”
Powell’s comments followed data earlier in the day showing that nonfarm payrolls rose by 228,000 jobs last month after a downwardly revised 117,000 rise in February, well above the 135,000 forecast. The unemployment rate ticked up to 4.2 percent from 4.1 percent.
Markets drew little comfort from the numbers because “they don’t factor in any of this week’s events or the fallout that will inevitably come with them over the next few weeks,” said Helen Given, director of trading, Monex USA.
