The US dollar slumped by 1.5% on Wednesday following comments from New York Fed President William Dudley who warned of tightening financial conditions. Speaking in an interview with MNI, Dudley said if the worsening financial conditions are still in place by the March meeting, the Fed would have to take it in consideration. He added that any further increases in dollar’s value could have “significant consequences” for the health of the US economy.
Ten-year US treasury yields dropped to near one-year lows on Wednesday as markets lowered their outlook for further rate hikes by the Fed this year. This pushed the dollar to 3-month lows but US equities were given a boost. A weaker-than-expected ISM non-manufacturing survey out yesterday also weighed on the US currency.
The dollar hit a low of 117.04 yen yesterday but had rebounded to just above 118 yen in Asian trading today. The euro soared to a 3-month high of 1.1145 dollars but had eased to 1.1084 dollars today. The pound also performed strongly as it was given an additional boost by better-than-expected services PMI. Sterling peaked above 1.46 dollars yesterday before settling around 1.4570 dollars in today’s Asian session.
The greenback’s retreat helped oil make a strong rebound, which surged by 8% yesterday despite a bigger-than-expected increase in US oil inventories. WTI crude futures were last trading at $32.81 a barrel, while Brent crude was at $35.54.
Commodity-driven currencies rose sharply with the Australian dollar climbing back above 0.71 versus the greenback and the kiwi holding above 0.6650 on Thursday. Meanwhile, the Canadian dollar rose to a 1½ month-high of 1.3719 per US dollar.
The dollar’s slide also helped gold prices, which gained more than 1% to climb to $1142 per ounce today.
Looking ahead to the rest of the day, investors will be watching the Bank of England’s latest quarterly inflation report and Mark Carney’s press conference for any changes to the Bank’s outlook since the November report. US jobless claims and factory orders due later in the US session will also be eyed.
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