• News
  • Finance

Dollar Retreats Against Euro Before Fed Decision; Pound Declines

June 18 (Bloomberg) -- The dollar fell against the euro before the Federal Reserve announces its latest policy decision as investors debate whether the economy is strong enough for officials to start considering raising interest rates.

The Bloomberg Dollar Spot Index declined after recording its highest close in a week yesterday. The pound depreciated the most in three weeks versus the euro as minutes of the Bank of England’s June meeting showed officials voted unanimously to keep interest rates on hold even as they reinforced Governor Mark Carney’s message that an increase may come sooner than investors anticipate. South Africa’s rand jumped as inflation accelerated and the current-account deficit narrowed.

“If the Fed turns a little bit more hawkish today, that will help the dollar,” said Alvin Tan, a foreign-exchange strategist at Societe Generale SA in London. “We are not sure if this is the time for an uptrend in the dollar yet. Probably we think more likely toward the end of the third quarter” as stimulus nears the end, he said.

The U.S. currency fell 0.1 percent to $1.3564 per euro as of 8:05 a.m. New York time after advancing 0.2 percent yesterday. The dollar was little changed at 102.21 yen from 102.31 earlier, the strongest level since June 11. The Japanese currency fell for a fourth day against the euro, weakening 0.2 percent to 138.65 per euro.

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, dropped to 1,014.10 from 1,014.57 yesterday, the highest close since June 10. It has advanced 1.4 percent since declining to its 2014 low on May 8.

The Fed is reducing its monthly bond purchases, while keeping the target for overnight lending between banks in the range of zero to 0.25 percent, where it has been since December 2008. Officials signaled at their April 29-30 meeting that interest rates will stay low for a “considerable time.”

Policy makers will cut their asset-purchase target by another $10 billion today, according to analyst estimates.

The pound slipped 0.3 percent to 80.06 pence per euro, the biggest depreciation since May 28. It has slipped from 79.59 pence on June 16, the strongest level since October 2012. Sterling declined 0.1 percent to $1.6944 after rising to $1.7011 on June 16, the highest since August 2009.

User Response
0 UserComments