The dollar edged higher Friday after President-elect Joe Biden outlined his plans for additional stimulus, but gains are likely to be limited after Federal Reserve Chairman Jerome Powell declined to join any discussion about reducing monetary stimulus.
At 4 AM ET, the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 90.267, rebounding from last week’s near three-year low. USD/JPY was down 0.1% at 103.67, while the risk-sensitive AUD/USD was down 0.3% at 0.7753.
Biden released details of his $1.9 trillion spending plan overnight, including more direct payments to households, an expansion of jobless benefits and an enlargement of vaccinations and virus-testing programs. The proposal has been expected ever since the Democrats won control of the Senate in early January, but questions over how his administration plans to foot the bill has driven Treasury yields higher, supporting the greenback.
Still, gains are limited after Fed Chair Jerome Powell adopted a very dovish tone in a live-streamed interview on Thursday, although he didn’t explicitly rule out a tapering of bond purchases toward year-end. The Fed doesn’t expect to raise interest rates until 2023 at the earliest.