Dollar Doldrums Persist As Markets Eye Fed
The dollar remained in a funk versus other major currencies on Monday, despite speculation that the Federal Reserve will signal it is not going to renew its controversial asset purchase plan when it expires in June.
The Fed makes its latest interest rate decision on Wednesday. While the $600 billion quantitative easing program may be winding down, policy makers are unlikely to raise interest rates from near zero anytime soon.
Rising risk appetite makes the dollar less attractive for investors looking for higher-yields, weighing on the dollar.
Last week, dollar index futures fell to their lowest level since 2008, stung by S&P’s downgraded outlook on U.S. debt and lingering weakness in the nation’s economy.
There was little relief for the dollar today, with traders waiting for Wednesday’s remarks from Fed Chair Ben Bernanke and company.
The buck stayed near multi-decade lows versus the Austrialian dollar and Swiss franc, while showing modest improvement against its Canadian counterpart as crude oil prices eased.
In early afternoon dealing in New York, the dollar fetched C$0.9550.
The buck was wobbling near $1.4580 versus the euro, having touched a 16-month low of $1.4647 last week.
The dollar stayed away from a recently yearly low near $1.66 versus the sterling. The pair moved near $1.65 today.
In economic news, U.S. sales of new homes rebounded 11.1 percent in March to a seasonally adjusted annual rate of 300,000, the Commerce Department said Monday.
Still, new home sales were down 21.9 percent from March 2010 levels.
Bank of Italy’s Governor Mario Draghi has gained support from French President Nicolas Sarkozy in the race to become the next European Central Bank chief, Bloomberg News reported Monday, citing an unidentified source.
Sarkozy is expected to disclose his support to Draghi tomorrow in Rome. As Draghi is the only representative for the post from the big-four eurozone nations, namely Germany, France, Italy and Spain, the French support raises the chance of him being selected as the ECB chief, the Bloomberg report said. His bid apparently has German backing.
The current central bank President Jean-Claude Trichet’s term expires on October 31.
Spanish producer prices rose 7.8 percent annually in March after rising 7.6 percent in February, the statistical office INE said Monday. On a monthly basis, producer prices rose 0.9 percent, the same rate of growth as seen in February.
