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    Greenback hits new 3-1/2 month bottom

    The greenback lost ground against its other rivals on Thursday, as it remained under pressured over concerns on how much the Federal Reserve will be able to hike rates in 2016.

    The U.S. dollar index, which tracks the dollar’s performance against six other major peers plunged 0.83% to 96.44, the lowest level since the 23rd of October 2016. 

    The currency fell considerably on Wednesday, following the release of soft U.S. service sector report and dovish central bank’s remarks, urging market participants to lower expectations on further rate raises.

    The Institute of Supply Management announced that activity in the U.S. services sector declined to a fresh 2-year low last month. William Dudley, New York Fed President, argued that the slowing outlook of the global economy in combination with a stronger dollar could have a considerable impact on the U.S. economy’s health.

    Another report released on the same day revealed that initial jobless claims advanced by 8,000 to 285,000 last week, exceeding analysts’ expectations, but remained in area associated with stronger labour market.

    The greenback lost all the gains registered in the aftermath of last Friday’s shock decision of the BoJ to apply negative interest rates. On the other hand, the single currency and the yen strengthened, with EUR/USD jumping 1.07% to 1.1222 and USD/JPY losing 0.7% to 117.08.

    The sterling was also under pressure, retreating from daily highs against the dollar to trade at 1.4612, in response of the Bank of England’s unanimous vote to keep interest rates unchained at 0.5%, while also cutting its forecast for economic growth.  

    Meanwhile, the commodity-related currencies remained considerably higher, despite oil prices retreating from previous highs, with USD/CAD falling 0.75% to new 1-month lows of 1.3679. Elsewhere, AUD/USD gained 0.88% and NZD/USD rose 0.91% to 0.6723.

    All eyes are on Friday’s U.S. nonfarm payrolls report for January for signals on the state of the labour market.

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