Breaking: Dollar surges as Fed Chair Powell says appropriate to consider faster QE taper
30.11.2021, 16:22

Breaking: Dollar surges as Fed Chair Powell says appropriate to consider faster QE taper

The US dollar surged on Tuesday following comments from Fed Chair Jerome Powell, who indicated it would be appropriate to consider wrapping up the bank's QE taper a few months sooner. Powell, speaking before the Committee on Banking, Housing, and Urban Affairs of the US Senate alongside US Treasury Secretary Janet Yellen, added that the Fed would discuss speeding the QE taper at the 15 December FOMC meeting. 

Powell also said that it was time to retire the word "transitory" as a description of inflation in the US. On inflation, he said that the risk of higher inflation had increased, that price increases have spread more broadly and that the risk of high inflation could undermine the Fed's efforts to get the US back to full employment.

Powell's remarks were interpreted hawkishly and, as a result, the US dollar and US yields (particularly real yields and short-end nominal yields) shot higher. The DXY, which had been trading around 95.50 prior to Powell's remarks, at one point rallied to the north of the 96.50 level, a more than 1.0% turnaround from prior session lows at the time. Profit-taking has since seen this gains moderate somewhat, with the DXY now trading around 96.40, where it trades higher on the day by about 0.2%. 

For reference, US 2-year yields saw a more than 10bps surge from prior session lows under 0.45% to above 0.55% and the 5-year TIPS yield also surged more than 10bps to above -1.70% from previously under -1.80%. 

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