Why did Jerome Powell’s statement strengthen the U.S. dollar?
Jerome Powell’s statement strengthened the U.S. dollar because it _____________.
Wrong! - What events create an appreciation of the U.S. dollar? Which of these events is Jerome Powell describing in the news clip?
Good Job! - When interest rates rise, the U.S. interest rate differential increases and the U.S. dollar appreciates. Given Jerome Powell’s statement that the Fed would not hesitate to raise interest rates if needed, traders expect future action by the Fed which will increase the future U.S. interest rate differential and the expected future exchange rate. An increase in the future exchange rate strengthens the U.S. dollar exchange rate today.
