“Higher interest rates are painful, but they are the tool we have to reduce inflation”Powell said.
Investors are concerned that forceful rate hikes by the world’s major central banks will cause a severe slowdown or a global recession. Higher rates strengthened the dollar, but the euro has also appreciated in recent days as the European Central Bank (ECB) plans to start raising its borrowing costs.
“The Federal Reserve’s determination is setting the stage for more aggressive moves by other central banks and that is driving the euro higher,” said Kathy Lien, managing director of BK Asset Management in New York.
“The sell-off in US Treasuries tells us the market wasn’t surprised by anything Powell said. I would attribute the dollar’s weakness to moving in lockstep with Treasury yields,” he said. .
The dollar index fell 0.31%, while the euro rose 0.47% to $1.0574. The yen strengthened 0.36% to 136.14 per dollar, while the British pound fell 0.04% to $1.2267.
The dollar, a haven asset, was gaining ground against most of its peers. On Tuesday, The yen tumbled to a new 24-year low as rising US and European bond yields contrasted with low Japanese interest rates.