NEW YORK, March 20 — The US dollar edged lower against a basket of major currencies yesterday as concerns over the strength of the US economy and expectations that the Federal Reserve will prove accommodative at its meeting this week weighed on the greenback.
The dollar index, which measures the greenback against six major currencies, fell 0.15 per cent to 96.375, hovering close to a more than two-week low touched overnight.
Traders are focused on the Federal Reserve, which kicked off its two-day policy meeting yesterday, for clues about the likely path of US borrowing costs and whether the central bank will affirm its commitment to “patient” monetary policy, analysts said.
Investors will particularly look to see whether policymakers have sufficiently lowered their interest rate forecasts to more closely align their “dot plot,” a diagram showing individual policymakers’ rate views for the next three years, analysts said.
“What we are seeing is the market positioning for potentially a more dovish tone tomorrow,” said Minh Trang, senior currency trader at California’s Silicon Valley Bank.
More detail on a plan to stop cutting the Fed’s holdings of nearly US$3.8 trillion (RM15.5 trillion) in bonds is also expected, analysts said.
Earlier yesterday, data showed new orders for US-made goods rose less than expected in January and shipments fell for a fourth straight month. That follows data on Friday that showed US manufacturing output fell for a second straight month in February.
“The softer inflation readings, disappointing job growth and the soggy manufacturing output reinforces ideas that the central bank is out of the picture for the coming months,” Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a note.
The Australian dollar, which has advanced in recent days — helped by the US dollar’s weakness — was down 0.22 per cent after minutes of the Reserve Bank of Australia’s March policy meeting expressed concern about the housing market.
Volatility in foreign exchange markets is at its lowest in five years and analysts say recent decisions by the Fed and other major central banks are contributing.
“Central banks are like a fleet of planes on the runway and they are all kind of circling around the tarmac and no one really wants to take off,” said Trang.
Sterling was up 0.18 per cent at US$1.3278. It pared early gains on concerns that British Prime Minister Theresa May’s request for postponing Brexit was running into complications with the European Union. — Reuters
