Stimulus Check – Dollar at lowest in a month after Fed knock; U.S. data disappoints
- Dollar index down 0.383%
- U.S. economy grows solidly in Q2 but misses forecasts
NEW YORK, July 29 (Reuters) – The dollar fell to a one-month low on Thursday, a day after the U.S. Federal Reserve said the job market still had “some ground to cover” before it would be time to ease monetary stimulus, taking the steam out of a monthlong rally by the greenback.
The dollar index , which measures the greenback against a basket of six other currencies, was down 0.383% at 91.905, its lowest since June 29.
The euro gained 0.35% against the dollar, to 1.1885.
“The dollar’s reign over the euro appears over as the Fed appears nowhere near tapering as the economy slowly makes its way to achieving substantial progress in the labor market,” said Edward Moya, senior market analyst for the Americas at OANDA.
The index, which is still up 1.6% since the Fed’s June meeting, after a hawkish shift from the U.S. central bank, found little support from U.S. gross domestic product numbers released on Thursday.
Data showed that while the U.S. economy grew solidly in the second quarter, boosted by massive government aid, growth fell short of economists’ expectations.
GDP increased at a 6.5% annualised rate last quarter, the Commerce Department said on Thursday, well below the 8.5% rate economists polled by Reuters had forecast. read more
“With the dollar already under pressure today as the risk environment stabilises and markets embrace the dovish rhetoric from Fed Chair (Jerome) Powell yesterday, the near-2-percentage-point miss in Q2 GDP did little to relieve the greenback,” said Simon Harvey, senior FX market analyst at Monex Europe.
U.S. Treasury yields trended lower after Wednesday’s Fed statement, with inflation-adjusted real yields tumbling to a new low, weighing on the U.S. currency. , .
“Should the yield curve continue to slowly steepen with risk appetite remaining in place, dollar bearishness could accelerate in the coming weeks,” said OANDA’s Moya.
The market took Wednesday’s Fed announcement as a positive for risk as it leaves the lower-rates-for-longer scenario intact, said Brad Bechtel, global head of FX at Jefferies.
“Combined with soothing commentary from Chinese officials on what their intentions are regarding IPOs in the U.S. and this regulatory crackdown they embarked on … markets were set up for a nice little rally last night,” he said.
China stepped up attempts to calm frayed investor nerves after a wild markets rout this week by telling foreign brokerages not to “overinterpret” its latest regulatory actions. read more
The Australian and New Zealand dollars, reliant on world and Chinese economic growth, rose 0.33% and 0.7% respectively.
The U.S. dollar’s weaker tone and a fall in coronavirus cases in Britain helped lift the British pound to its highest in over a month against the dollar. read more
Reporting by Saqib Iqbal Ahmed and John McCrank in New York; additional reporting by Sujata Rao in London; Editing by Mike Harrison, Steve Orlofsky and Jonathan Oatis
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