CURRENCIES: Fed-fueled Dollar Rally Stalls As Traders Await More Clues
May 25 2016 - 03:40PM
Dow Jones News
By Joseph Adinolfi and Sara Sjolin, MarketWatch , Hiroyuki
Kachi
Canadian dollar rises after BOC keeps interest rates on hold
The dollar edged higher against the yen on Wednesday but
weakened against the euro and pound, as a rally fueled by the
possibility of a summer interest-rate hike stalled.
Recent polls suggested the U.K. likely won't vote to leave the
European Union during a crucial referendum next month, sending the
pound to its highest level against the dollar in three weeks.
The ICE U.S. Dollar index, , a key gauge of the dollar's
strength, was down 0.1% at 95.4960. The pound bought $1.4714 late
Wednesday in New York, compared with $1.4618 late Tuesday.
Among other things, investors are looking ahead to remarks from
Federal Reserve Chairwoman Janet Yellen, expected Friday.
The greenback has strengthened broadly in recent weeks amid
repeated warnings from Federal Reserve officials that the central
bank could raise interest rates two or three times this year.
Impressive U.S. new-home sales data
(http://www.marketwatch.com/story/new-home-sales-roar-back-crushing-forecasts-with-a-619000-annual-pace-in-april-2016-05-24)
helped support the dollar on Tuesday. Last week, minutes from the
Fed's April meeting showed a majority on its policy-setting
committee would support a rate increase in June if economic growth
remained robust.
The dollar had sunk sharply during the first six weeks of the
year as a spate of mixed U.S. data and anxieties about slowing
global growth prompted investors to dial back their expectations
for a rate increase until the fourth quarter.
On Wednesday, the euro edged slightly higher after a group of
eurozone finance ministers and the International Monetary Fund
reached an agreement on unlocking the next tranche of bailout
funding for Greece
(http://www.marketwatch.com/story/breakthrough-greek-debt-deal-reached-with-eurozone-imf-2016-05-24).
German Ifo business climate index came in slightly better than
expected, a sign that domestic activity remains robust after
official data confirmed that Germany's gross domestic product
growth accelerated in the first quarter.
(http://www.marketwatch.com/story/german-gdp-growth-picks-up-pace-in-first-quarter-2016-05-24)
The euro recently traded at $1.1161 late Wednesday, compared
with $1.1140 late Tuesday.
"The news helped to arrest the euro decline which has been on a
one way trip south ever since the FOMC minutes last week suggested
that the Fed is ready to move on rates as early as June," said
Boris Schlossberg, managing director of currency strategy at BK
Asset Management.
The dollar strengthened against the yen, buying Yen110.11 late
Wednesday, compared with Yen110.00 late Tuesday in New York.
Bank of Canada leaves rates on hold
The Canadian dollar rose against its U.S. rival Wednesday after
the Bank of Canada left its benchmark interest rate unchanged at
0.5%. The bank also said in a news release that it expects the
devastating Alberta wildfires have hampered economic growth in the
second quarter, though it expects growth to rebound in the
third.
The dollar fell to C$1.3035 late Wednesday, compared with
C$1.3124 late Tuesday.
Read:These are the EU countries that would suffer after Brexit,
says Fitch
(http://www.marketwatch.com/story/ireland-belgium-malta-to-be-hit-hard-if-brexit-gets-green-light-says-fitch-2016-05-16)
Chinese yuan hits three-month low
Elsewhere, the People's Bank of China set its daily yuan-fixing
at the weakest level against the U.S. dollar in more than five
years
(http://www.marketwatch.com/story/pboc-fixes-yuan-at-lowest-level-against-dollar-in-more-than-5-years-2016-05-25).
The onshore yuan weakened to 6.5642 afterward, a three-month
low.
(END) Dow Jones Newswires
May 25, 2016 15:25 ET (19:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.