28/04/2015 01:34 AST
The dollar fell against the euro and the yen on Monday amid concerns the Federal Reserve’s policy-making committee meeting this week could offer little guidance on the timing of its next interest rate increase.
The Wall Street Journal Dollar Index, which compares the buck against a basket of 16 commonly traded currencies, slipped 0.1%, to 86.31, dropping for a fourth straight day and hitting its lowest level since March 3. The index has plunged 3.4% from its 12-year high of 89.33, reached on March 13.
Monday’s price moves signal a dollar that continues to struggle ahead of the two-day Federal Open Market Committee meeting, which concludes Wednesday. Many currency strategists predict the Fed’s message on the economy will remained largely unchanged, giving the dollar little momentum.
The dollar dipped 0.1% against the common currency in late-afternoon trade, as one euro bought $1.0885, the greenback’s weakest level in three weeks.
The U.S. currency’s rally during the second half of 2014 and the first quarter of this year has stalled after the Fed lowered U.S. inflation and growth expectations at its March 18 policy-making meeting and mentioned that the strong dollar could weigh on exports.
Investors believe a recovering U.S. economy would persuade the Fed to raise interest rates from near zero. Higher U.S. rates make the dollar more attractive as they boost returns on assets denominated in the currency.
The dollar’s struggle continued over the past month as disappointing numbers for employment, retail sales, industrial production and new-home sales has led investors to conclude that a stronger U.S. recovery would be delayed. Until U.S. economic data points rebound, dollar interest likely will remain tepid, said Carl Forcheski, director of corporate currencies sales at Société Générale.
Economists expect gross domestic product for the first quarter, to be released on Wednesday, to show slight growth, at 1%, falling from 2.2% gains at the end of last year.
“People are cutting back on their long-dollar positions, waiting to see weather-affected data fade,” Mr. Forcheski said. But solid May nonfarm payrolls, to be reported on May 8, and May retail sales due on May 13 “will probably arrest any further correction we’ve been seeing and put the dollar on an even keel and ready to rise when we see strong signals from the Fed.”
Fed-funds futures, which are used to wager on Fed policies, show traders and investors are betting on a 56% probability of the Fed raising rates in December, compared with a 42% likelihood in October, according to numbers from the CME Group. One month ago, investors wagered on a 55% possibility in October.
In other trade, the dollar edged 0.1% higher against the yen to ¥119.08.
WSJ
Please wait...
