The American dollar slumped, extending the longest losing streak since July, as currency traders seeking a clearer signal that Federal Reserve policy makers gave indications that they were on track to hike rates next month, Bloomberg reports.
The greenback weakened against most of its major peers, led by the kiwi and the rand, as the central bank left its key interest-rate target unchanged and said officials want further evidence before tightening monetary policy next month.
Investors are also coping with uncertainty just six days before the tightening U.S. presidential election and two days before the October employment report.
“The risks are skewed to a softer dollar” against the euro, yen and Swiss franc, before the election, said Bipan Rai, senior foreign-exchange and macro strategist in Toronto at Canadian Imperial Bank of Commerce. “Markets were expecting an explicit signal, and it doesn’t look like the Fed was comfortable sending that message a week before the election.”
The dollar has fallen 2.5 percent this year as Fed officials have held off from raising interest rates on concerns ranging from Brexit to lackluster global growth. While the Fed officials said they are confident that inflation is on track to reach their 2 percent target, foreign-exchange strategists said the central-bank statement remained in line with recent policy-makers’ comments.
The Bloomberg Dollar Spot Index fell 0.2 percent in New York, its fourth straight decline. The greenback declined 0.4 percent to $1.1098 per euro and dropped 0.8 percent to 103.30 yen.
Regardless of when the Fed moves, dollar bulls face the prospect of the slowest and shallowest tightening cycle in recent history, based on the market for overnight index swaps, which reflect expectations for the fed funds effective rate.
The contracts imply the rate will rise to about 0.96 percent in three years from 0.41 percent now — essentially just two hikes during the next 36 months.
