Dollar Up From 13-Month Low Ahead Of Fed Decision

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The U.S. dollar is up from 13-month lows against the other major currencies on Wednesday as investors awaited the result of the Federal Reserve’s latest policy meeting and decision later in the day.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.09% at 94.00, moving away from Tuesday’s 13-month low of 93.46.

FOMC Statement

The Fed is widely expected to keep policy on hold, but Investors were hoping that the Fed’s rate statement, due later Wednesday, will reveal more about policy plans for the second half of the year, with markets paying close attention to details of when and how the Fed will start reducing its $4.5 trillion balance sheet.

Doubts over the Feds plans for a third rate hike this year have recently weighed on the greenback.

Markets have reduced expectations for a U.S. interest rate increase in the coming months with expectations of another rate hike at less than 50 percent before the end of the year.

“If there is no change in the language of the statement, we can expect a mild dollar rally and there would be a better opportunity for the Fed to communicate its policy expectations at Jackson Hole next month,” said Ulrich Leuchtmann, a currency strategist.

Investors also stayed focused on the investigation into alleged links between U.S. President Donald Trump’s administration and Russia in last year’s election.

On Monday, Jared Kushner, Trump’s son-in-law and a senior White House adviser, told Senate investigators he had met with Russian officials four times last year but said he did not collude with Moscow.

Investors fear the persistent political turmoil will disrupt the Trump administration’s pro-growth economic agenda of tax cuts and infrastructure spending, which helped propel the dollar to 14-year peaks after the November election.

Dollar Against Other Currencies

Euro against the dollar was little changed at 1.1627, off session lows of 1.1613, while the sterling edged up against the greenback 0.09% to 1.3040, erasing earlier losses, after the U.K. Office for National Statistics said gross domestic product rose by 0.3% in the three months to June, from 0.2% growth in the first three months of the year, wherein economists had forecast growth of 0.3%.

On a year-over-year basis the economy expanded by 1.7% from 2.0% in the first quarter, also in line with forecasts.

Moreover, the dollar was little changed against the safe-haven yen at 111.91, while it climbed against the swiss franc 0.60% to trade at 0.9581.Lastly, the Australian dollar remained weak, with the Aussie dollar down 0.23% at 0.7919, while the New Zealand dollar or kiwi added 0.18% to 0.7431.

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Dollar Continues To Slump, Sinks To 10-Month Lows

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The U.S. dollar continues to slump as it sank to 10-month lows against the other major currencies on Tuesday, after an attempt to pass healthcare reform collapsed and amid a sell-off ignited by another setback to U.S. President Donald Trump’s agenda and doubts over prospects for another rate hike this year.

Greenback Sinks Against Major Currencies

The U.S. dollar index against a group of six major currencies was 0.64% lower at 94.31, the lowest trough since September 9, 2016.

The dollar was at almost three-week lows, weaker against the yen, with USD/JPY down 0.55% to 112.00, after falling as low as 111.99 overnight.

The euro rose to fresh 14-month highs against the dollar, with EUR/USD advancing 0.86% to 1.1577, after touching overnight highs of 1.1538.

Sterling was lower, with GBP/USD down 0.26% to 1.3022 after data showing that the annual rate of inflation in Britain fell for the first time since October last month.

Healthcare Issue and Rate Hike

The dollar came under renewed selling pressure after a second attempt by Republicans to replace Obamacare collapsed late Monday, bringing a major policy blow to the Trump administration.

Around half of the cuts in healthcare spending were reserved to finance proposed tax cuts. The failure to deliver healthcare reform added to disappointment over the lack of progress on Trump’s economic agenda.

The dollar was already on the defensive side after Friday’s weak U.S. inflation and retail sales data that  added to doubts that the Fed will be able to raise interest rates again this year.

Other Currencies

Elsewhere, the Australian dollar jumped to two-year highs, with AUD/USD,  adding 1.59% to trade at 0.7926, after the minutes from the central bank’s last policy meeting showed it turning more positive on the economic outlook.

The New Zealand dollar was also higher, with NZD/USD rising 0.61% to 0.7364. The kiwi initially turned lower overnight before regaining ground after weak inflation data indicated that the country’s central bank will keep interest rates on hold for longer.

The Canadian dollar hit fresh 14-month highs, with USD/CAD last at 1.2624.

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Gold Down Amid Geopolitical Concerns; Ahead of Fed Minutes

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Gold prices are currently down on Wednesday, moving down beyond its lowest level in almost two months amid heightened geopolitical risk after North Korea said it had successfully test fired an intercontinental ballistic missile and ahead of the Wednesday release of Fed minutes from the June meeting which is expected to provide greater understanding into the chances for another hike this year.

Gold futures were at $1,217.86, by 10:04 AM GMT, down 1.62 cents, or around 0.1%. Trade volumes were thin on Tuesday, as U.S. markets remained closed for the Independence Day holiday.

The yellow metal dropped on Monday around 2% to touch its lowest since May 11 at $1,218.00 as a stronger dollar and gains in U.S. equities weighed. Then, gold prices bounced back after a sharp fall on Tuesday amid heightened geopolitical risk after North Korea said it had successfully test fired an intercontinental ballistic missile.

Meanwhile, looking ahead, the Federal Reserve will release the minutes of its most recent policy meeting at 2:00PM ET (1800GMT), as investors look for more clues on how committed the central bank is to hiking rates again this year. They are also looking for any detail on plans to reverse the Fed’s massive balance sheet.

North Korea Missile Test

South Korea’s military and Japan’s government confirmed that North Korea had fired an “unidentified ballistic missile” which landed in the Sea of Japan. Tokyo strongly protested what it called a clear violation of UN resolutions. Analysts said the missile  could put all of the U.S. state of Alaska in range for the first time.

U.S. Secretary of State Rex Tillerson said that the long-range missile launch indicated a “new escalation of the threat” of President Kim Jong-un’s regime and called for global action.

The timing of the launch is important, come just days before leaders from the Group of 20 nations are due to discuss steps to restrain North Korea’s weapons programs.

Other Comex Futures Also Down

Silver futures ticked down further 0.2 cents, or 1.1%, to $15.87 a troy ounce, after falling to $16.02 in overnight trade, a level not seen since early January.

Among other precious metals, platinum futures were down 0.14% to $904.85, while palladium rose 0.8% to $849.17 an ounce.

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Dollar Increases Gains Against Other Currencies

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The dollar extended gains against the other major currencies on Monday, pulling away from nine-month lows, but the greenback’s upside was expected to stay limited amid expectations for tighter monetary policy by major central banks.

The euro dropped against the dollar 0.51% to 1.1369, off Friday’s 13-month peak of 1.1448, while the sterling declined 0.47% to 1.2967, pulling away from last week’s six-week high of 1.3032.

The dollar index against a group of six major currencies was 0.50% higher at 95.86, crawling off a nine-month trough of 95.470 plumbed on Friday.

In last week’s comments, the heads of the European Central Bank, the Bank of England and the Bank of Canada embraced a more aggressive view on monetary policy, indicating that they were getting ready to join the Federal Reserve in policy tightening.

Aggressive signals from foreign central banks contrasted with doubts over whether the Fed will be able to carry out hike rates again this year given a recent batch of weak U.S. economic data and growing skepticism that the Trump administration will be able to deliver on its pro-growth agenda.

Elsewhere, the greenback rallied against the yen and swiss franc 0.55% to 113.04 and 0.50% to trade at 0.9626, respectively. Meanwhile, the aussie dollar and kiwi were weaker against the dollar, down 0.44% to 0.7656 and 0.55% to 0.7292, respectively.

The yen briefly rose after Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in Tokyo on Sunday, in a vote that could be a harbinger for national elections.

“The Tokyo election won’t have a strong market impact, in my view, as there are no opposition parties in Japan that can immediately replace the (ruling) LDP,” said Yukio Ishizuki, a senior currency strategist.

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