Dollar Turns Weak Against Major Counterparts

(RTTNews) - The U.S. dollar weakened against major counterparts on Friday after debt ceiling deal talks paused, and the Federal Reserve Chair Jerome Powell signaled a likely pause in interest rate hikes next month.

Speaking alongside former Fed Chair Bernanke, Powell noted that the Fed may not have to raise its policy rate as much as it would have to otherwise if tighter credit conditions weigh on growth.

"Tighter credit conditions mean that "our policy rate may not need to rise as much as it would have otherwise to achieve our goals," Powell said at a central bank conference in Washington.

Powell said the bank would now make decisions "meeting by meeting," but also flagged that after a year of aggressive rate increases, officials can afford to make "careful assessments" of the impact of rate hikes on the economic outlook.

"The Fed Chair appears content with signaling patience with regards to future tightening. Powell has paved the way for the Fed to pause its rate hiking campaign at the June FOMC meeting. The Fed could however resume tightening as Powell reiterated that inflation is far above the Fed's objective," says Edward Moya, Senior Market Analyst at OANDA.

Meanwhile, Republican negotiators walked out of a meeting over raising the U.S. debt ceiling, offsetting recent optimism about an impending deal.

"Until people are willing to have reasonable conversations about how you can actually move forward and do the right thing, then we're not gonna sit here and talk to ourselves," Rep. Garret Graves, R-La., told reporters.

The dollar index, which dropped to 103.00, has recovered to 103.20, but still remains in negative territory, netting a loss of nearly 0.4%.

Against the Euro, the dollar has weakened to 1.0809 from 1.0771. The dollar is weak against Pound Sterling at 1.2446, easing from 1.2410.

Against the Japanese currency, the dollar has dropped to 137.93 yen from 138.71 yen. The dollar is weak against the Aussie at 0.6649, and has eased against Swiss franc to CHF 0.8996. The Loonie is little changed against the dollar at 1.3504.