Dollar Retreats After Initial Rebound, Loses Ground Against Peers
The U.S. dollar turned weak against most major currencies on Thursday after appearing to gain in strength, weighed down by the Federal Reserve’s statement that said interest rates will likely remain near zero for another three years.
Although the greenback scored gains over some of its peers, due largely to short-covering after recent weakness, it failed to hold at higher levels, and the latest batch of economic data played a role as well in causing its decline.
On Wednesday, the Fed left interest rates unchanged, said low rates will continue through 2023, and retained its asset purchase program. In his post-meeting press conference, Fed Chair Jerome Powell cautioned that the pace of the economic recovery is expected to slow and urged for fiscal stimulus from Congress to sustain the recovery.
Data from the Labor Department today showed initial jobless claims slipped to 860,000 in the week ended September 12th, a decrease of 33,000 from the previous week’s revised level of 893,000. Economists had expected jobless claims to dip to 850,000 from the 884,000 originally reported for the previous week.
A report from the Commerce Department said housing starts tumbled by 5.1% to an annual rate of 1.416 million in August after soaring by 17.9% percent to a revised rate of 1.492 million in July. Economists had expected housing starts to pullback by 1.2% to a rate of 1.478 million from the 1.496 million originally reported for the previous month.
The Commerce Department said building permits also fell by 0.9% to an annual rate of 1.470 million in August after spiking by 17.9% to a revised rate of 1.483 million in July. Building permits, an indicator of future housing demand, had been expected to increase by 1.7% in August.
A separate report from the Federal Reserve Bank of Philadelphia showed a modest slowdown in the pace of growth in regional manufacturing activity.
The dollar index, which rose to 93.59 in the Asian session, slid gradually as the day progressed and hit a low of 92.87, netting a loss of about 0.37% from previous close.
Against the Euro, the dollar eased to $1.1847, down 0.25% from Wednesday afternoon.
The Pound Sterling was up marginally, fetching $1.2978, after having dropped to $1.2866 a unit. The Bank of England’s nine-member Monetary Policy Committee voted unanimously to hold the interest rate at 0.10%, as widely expected.
The bank also retained the size of the asset purchase programme at GBP 745 billion and said the existing stance on monetary policy remains appropriate and that it does not intend to tighten policy until there is clear evidence that significant progress is being made in sustainably achieving the 2% inflation target.
The Yen strengthened to 104.53 a dollar after the Bank of Japan sounded confident about its outlook for the economy. The yen later dropped to 104.73 a dollar, but was still up in positive territory, gaining more than 0.2%. The BoJ left its policy rates unchanged.
Against the Aussie, the dollar was flat at $0.7311, losing ground after having firmed up to $0.2754 from previous close of $0.7306.
The Swiss franc was up marginally at 0.9804 a dollar. It had closed at 0.9094 on Wednesday.
The Loonie was stronger by 0.11% at 1.3164 a dollar, with higher crude oil prices supporting its uptick.