Dollar edges down from highs as oil slides

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The dollar pulled back from one-month highs against a basket of currencies on Wednesday as tumbling oil prices pushed down U.S. yields, while the pound1wobbled after Bank of England Governor Mark Carney shot down hopes of an interest rate hike.

The dollar index against a group of major currencies was 0.05 percent lower at 97.699. It had hit a one-month high of 97.871 on Tuesday as expectations that the U.S. Federal Reserve which hiked interest rates last week, would tighten policy again in 2017.

The greenback’s advance as the dollar-supportive bounce in U.S. Treasury yields was cut short overnight.

Following a big drop in oil prices, the 10-year Treasury note yield fell sharply on Tuesday, reversing a large portion of the gains it made after the Fed left the door open for another rate increase this year.

The euro was steady at $1.1137 after retreating to a three-week low of $1.1119 overnight. The dollar was down 0.2 percent at 111.220 yen , off a near one-month peak of 111.790 touched on Tuesday. The pound was little changed at $1.2630 . The currency had slid 0.9 percent overnight and plumbed a two-month trough of $1.2603.

While the U.S. currency’s advance may have stopped, some expected the losses to be limited with the dollar seen eventually resuming its move higher.

Senior currency strategist at Brown Brothers Harriman in Tokyo Masashi Murata said that sentiment towards the dollar may not be great but participants don’t have strong motivation to buy the yen or euro either given the low-yield policies of the Bank of Japan and the European Central Bank.

And with Wall Street shares holding near record highs and the Fed seemingly intent on increasing rates, the market would not be in a hurry pass negative judgement on the dollar.

Sterling wobbled near two-month lows after BoE’s Carney said on Tuesday that now was not the time to raise UK interest rates. Last week three out of eight BoE policymakers voted in favour of a rate hike and raised hopes for a near-term tightening.

 

The Canadian dollar, which fell about 0.35 percent overnight, extended losses to trade at C$1.3277 per dollar. The Australian dollar edged down 0.1 percent to $0.7574 and the New Zealand dollar was 0.2 percent lower at $0.7228.

Brent crude tumbled to seven-month lows on Tuesday as increased supply from several key producers overshadowed high compliance to an output cut deal among OPEC and non-OPEC oil producers.

Source : Reuters

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