Sunday 24th of May 2020

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Dollar Down Against Euro As Fed Meets

The U.S. dollar fell Wednesday from nearly a one-month high against the euro based on the expectation the Federal Reserve this week will keep an earlier commitment to let its target lending rate stay near zero for a longer period of time.

South Africa’s rand climbed against other major currencies for a second day as gold increased to a record and the nation’s central bank shied away from earlier statements it would try to curb the currency’s climb. The Norwegian krone was up for the first time in four days after crude oil went above $81 a barrel.

The dollar weakened 0.8 percent to $1.4842 against the euro from $1.4724 Tuesday, when it briefly was at $1.4626 – the strongest level since Oct. 5. The yen fall 1.5 percent to 134.95 against the euro, from 133.01. Japan’s currency fell 0.7% to 90.93 against the dollar, from 90.33.

The Fed was likely to continue its monetary policy Wednesday that interest rates will stay at a record low for an “extended period,” according to Citigroup Inc. Some observers believe this is linked to a Labor Department report expected on Friday to reveal the pace of job losses slowed in October, while the unemployment is up to 9.9 percent, from 9.8 percent a month earlier.

The Reserve Bank of Australia said Tuesday that interest-rate increases will occur gradually after it pushed up the benchmark cash target by a quarter-percentage point to 3.5%.

The Dollar Index with which IntercontinentalExchange tracks the dollar against the currencies of six major U.S. trading partners dropped 0.7 percent to 75.861. The index was up 1.3% following reaching a 14-month low of 74.940 in late October.

The one-month 25-delta risk-reversal rate for the euro against the dollar fell to negative 1.11 percent Wednesday, the lowest it has been since Dec. 10. A negative reading reflects traders are paying more for euro puts, or the right to sell the currency, than for calls, or the option to buy.

Sterling was up 0.8 percent to $1.6567 as Markit and the Chartered Institute of Purchasing and Supply said a measurement of service industries climbed in October to 56.9, the best level since August 2007.

The rand’s value improved, increasing 2.5% to 7.6437 per dollar as gold for December delivery hit a record $1,096.20. Traders forecast central banks and investors will buy gold to as protection from the dollar’s 5.8 percent decline against the euro this year.

South Africa’s currency climbed also as the Reserve Bank’s deputy governor said in a speech that policy makers will keep stockpiling reserves without interceding in foreign-exchange markets.

The Bank of England’s Monetary Policy Committee is expected to increase purchases Thursday by 50 billion pounds to 225 billion pounds, according to survey. Britain’s central bank is expected to maintain its key rate at a record low of 0.5%.