Dollar comes under Selling Pressure thanks to Fed Talk

The U.S. dollar was on the defensive during the Asian trade session on Friday. On Thursday, commentary from Federal Reserve officials bolstered trader sentiment that the Federal Open Market Committee (FOMC), the monetary policy arm of the Federal Reserve, will deliver a steep rate cut on July 31.

The benchmark USD/JPY exchange rate was up 0.15 percent to trade at 107.42 yen after fitting a three week low at 107.21 yen on Thursday.

The EUR/USD exchange rate was down a fraction to trade at 1.1255.

For the week, the dollar has fallen 0.4 percent against the yen and is trading nearly flat against the euro.

The dollar index, which measures the greenback in a basket against six other currencies, was slightly higher to trade at 96.824. The U.S. currency in the basket of currencies hit a two week low at 96.648 on Thursday.

The U.S. currency was broadly lower on Thursday after Federal Reserve Vice Chairman John Williams delivered monetary policy comments. Traders are now looking for a more aggressive rate cut instead of the expected 25 basis point rate cut markets are currently pricing in.

Traders Sell the Dollar while Digesting Fed Reserve Comments

At a central banking conference New York Fed President John Williams spoke in favor for preemptive measures before any problems emerge with the economy. He feels that the Fed should having to deal with low inflation and low rates.

Williams said when rates and inflation are low, the Fed cannot afford to keep their “powder dry” and wait for “problems to materialize.”

After he shocked the markets, the Federal Reserve was quick to clarify that his speech was not about policy but academic in nature. Traders still took his comments, along with comments made by Fed Vice Chair Richard Clarida as a dovish signal from the U.S. central bank.