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LONDON (Reuters) – The dollar held lower from the two-week low against rivals on Wednesday, with high-yielding currencies leading the winners as investors bet the central bank would decline even as the Partial lift of the coronavirus blocks grew.
FILE PHOTO: A man shows US dollar bills after withdrawing cash from a bank in Harare, Zimbabwe, July 9, 2019. REUTERS / Philimon Bulawayo
Against a basket of rivals = USD, the dollar fell 0.2% to 99.73 in London trade late in the morning, above the two-week low of 99.43 reached in the previous session.
The currency markets were largely on hold and watch with limited movements before the outcome of a meeting of the US Federal Reserve. USA Later in the day, where policy makers are seen to deliver on their promise to do whatever it takes to support the world’s largest economy.
Before that, the quarterly numbers of US GDP. USA They will be released at 1230 GMT, with consensus forecasts for a contraction of around 4%. Analysts are already focusing on the extent of the recovery in the coming months with a Reuters poll that expects the United States. The economy will expand 3.8% in 2021.
The dollar has weakened more than 3.5% after climbing to a more than three-year high of 102.99 in late March when global central banks launched massive stimulus measures to protect economies from the new coronavirus pandemic.
“The Fed’s policy response has been very aggressive,” said Lee Hardman, currency analyst at MUFG. He expects the Fed to continue to hold money touches to reduce risk in financial markets.
The unprecedented response from central banks has calmed nerves in the currency markets with the Deutsche Bank .DBCVIX currency volatility index receding sharply from its highs in March.
“Investors are also encouraged by plans to relax the blockade measures in France and Spain and other European countries and it appears that we will see a pickup in activity towards the end of the second quarter,” Hardman said.
The euro EUR = EBS rose 0.3% to $ 1.08545 ahead of a European Central Bank meeting on Thursday.
The currency was unaffected by Fitch’s downgrade of Italy’s sovereign rating to a level above rubbish as investors consoled some economies in reopening the bloc.
Meanwhile, US equity futures. USA ESc1 increased 0.7%, while the European stock markets were mixed.
“The weakening of the dollar and the strengthening of commodity-related currencies suggest that risk appetite may have continued to be supported for another day,” said Charalambos Pissouros, senior market analyst at JFD Group.
The Australian dollar AUD = D3 led the gains against the dollar with the currency rising 0.4% to $ 0.65200.
Reports of Saikat Chatterjee and Thyagaraju Adinarayan; Editing by Andrew Cawthorne and Ken Ferris
