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Dollar Index: Weekly Analysis & Forecast

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 U.S. 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.

“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.

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