Dollar sinks on US economic outlook concerns
WASHINGTON : The dollar fell sharply on Wednesday helped by a disappointing report on US services sector growth and comments from a top Federal Reserve official suggesting concern over rising economic risks.
The dollar lost nearly two cents on the euro, at $1.1111, and than two yen, at 117.81 yen.
The euro’s gain was aided early in the day as fresh data pointed to some persistent strength in the eurozone economy, with a 0.3 percent rise in retail sales in December, and the November number was revised upward by 0.3 percentage points to a flat reading.
“Fundamentals for eurozone households are solid,” said chief eurozone economist at Pantheon Macroeconomics, Claus Vistesen. “Consumers’ expectations of their economic and financial situation in the next 12 months sit close to all-time highs,” he noted.
He also said that a strengthening dollar could have “significant consequences” for the US economy.
“We’re acknowledging that things have happened in financial markets and in the flow of the economic data that may be in the process of altering the outlook for growth and the risk to the outlook for growth going forward.” he said.
Adding to that, the ISM’s US services sector purchasing managers index for January dropped more than expected, pointing to sluggish growth in the largest part of the US economy.
“Today’s ISM hit harder because services were to be this year’s bright spot while manufacturing deals with a higher dollar and global growth issues,” said Sophia Kearney-Lederman at FTN Financial.
Meanwhile, the British pound surged 1.3 percent on the dollar to $1.4601 ahead of the Bank of England’s meeting Thursday, which is not expected to see any adjustments to policy.
2200 GMT Wednesday
EUR/USD 1.1111 1.0917
EUR/JPY 130.90 131.01
EUR/CHF 1.1158 1.1125
EUR/GBP 0.7610 0.7574
USD/JPY 117.81 120.0
USD/CHF 1.0042 1.0190
GBP/USD 1.4601 1.4415