The United States of America Dollar, on Tuesday, July 18, slumped to a 10-month low against a basket of major currencies, hit by the latest collapse of President Donald Trump’s efforts to deliver a new healthcare bill in a market deeply worried by the pace of U.S. growth.
The Australian dollar was by far the biggest beneficiary of another slide for the greenback, jumping 1.5 percent to more than two-year highs after minutes from the Reserve Bank’s last policy meeting showed it turning more upbeat on the economy.
In four weeks dominated by expectations that by doubts over the Federal Reserve’s ability to raise interest rates further, and signs that other major central banks are finally turning more hawkish, the dollar is now down more than 3 percent.
Since hitting a 14-year peak of 103.82 on Jan. 3, at 94.830 on Tuesday, the dollar index was down 8.8 percent.
“Clearly anything that comes along at the moment just corroborates the market’s negative attitude o the dollar,” said Neil Mellor, senior FX strategist with Bank of New York Mellon in London.
“There’s just not enough inflation at the moment. And anything like this (defeat for Trump) is liable to push it lower.”
Two more Republican Senators, Jerry Moran and Mike Lee, announced their opposition late on Monday to a revised Republican healthcare bill, leaving efforts to pass the legislation in chaos.
“If the bills won’t pass, there will be no money for tax cuts. The implementation of his fiscal policy will be difficult,” said Bart Wakabayashi, Tokyo Branch Manager of State Street.
Friday’s weak reading on U.S. inflation and retail sales also fanned speculation that the Fed may not have justification for another rate hike by the end of this year, despite policymakers’ projection for such a move.
In contrast, central bank policymakers in the euro zone, the UK and Canada have recently signal led they could adjust their policies, with the Bank of Canada raising rates last week for the first time since 2010.
The euro rose 0.3 percent to $1.1517, hitting its highest levels since May last year.
The European Central Bank is expected to keep its policy on hold at its rates review on Thursday while many investors expect it to signal a reduction of its stimulus in the following policy meeting in September, Reuters reports.
That the move overnight was more about politics than interest rates, however, was visible in dollar-yen moves. The Japanese currency, which has suffered from the hawkish shift globally, gained 0.4 percent to 112.30 yen.
The Aussie was on track to make its biggest daily gain in four months, spurred by references to “neutral” interest rates.
