Greenback Slump
Powell’s reminder that policy makers are data dependent drove the dollar into the biggest decline this month. The currency has advanced in six of the past seven months, drawing support from the Fed’s tightening.
“The Fed has paid lip service to data dependence in the last few years, but data dependence has now arrived,” said Alan Ruskin, global co-head of foreign-exchange research at Deutsche Bank AG. “We are not too far off the top of the dollar.”
Gold Pops
Powell’s comments gave gold its first gain in four days. A falling U.S. currency helped deliver the metal a bit of a reprieve after pressuring the classic safe haven and other metals all year long.
“The USD will be knocked off its upward trajectory due to a flat yield curve, low rates relative to other G10 countries on a hedged basis, and as the Fed is likely to be less aggressive at a time when other central banks begin to really normalize their policies,” Bart Melek, head of commodity strategy at TD Securities, wrote in a note. “The path of the USD is important, as it has been the key factor weighing on the yellow metal this year.”
Mexican Yields Drop
The yields on Mexican dollar-denominated 10-year bonds slid 16 basis points to 4.8 percent. The yields dropped as prices rallied amid optimism the dollar will stay lower after reaching a 16-month high earlier in November.
Ten-Year Yields Ambivalent
In contrast, the U.S. 10-year yields were little changed. After falling 14 basis points in the two weeks leading up Powell’s comments, the yields barely budged at 3.06 percent. Yields on two-year securities fell.