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Dollar Loses Notable Ground Against Rivals

Dollar Loses Notable Ground Against Rivals
Stock market chart. Photography of monitor screen.

The U.S. dollar weakened against major currencies on Wednesday as traders sought riskier assets such as equities amid easing political concerns and data showing an acceleration in China’s service sector activity in August.

The dollar index declined to a low of 98.39 and was last seen hovering around 98.45, down by about 0.55% from previous close.

Against the euro, the dollar was down nearly 0.5% at 1.1028, after easing to a low of 1.1040. The euro gained after Christene Lagarde, who is likely to be the next president of the European Central Bank, said highly accommodative monetary policy for a prolonged period was necessary but added that the bank needed to be mindful of the negative side-effects of such tools.

The Pound Sterling was up sharply with a unit of sterling fetching $1.2230, more than 1.2% from previous close of $1.2084 a sterling.

The British Prime Minister Boris Johnson said after losing the confidence vote on Tuesday that he would table a motion for a general election, but main opposition Labour party leader Jeremy Corbyn said he will not back the early election unless the bill ruling out no-deal is passed first.

The Japanese Yen was down 0.4% against the dollar at 106.35 yen. The yen opened at 105.94 a dollar and dropped to a low of 106.44.

Among other currencies, the Aussie gained more than 0.5% with the AUD-USD pair trading at 0.6796.

Against Swiss franc, the dollar was down 0.6% at 0.9811, and against the loonie, it was lower by nearly 0.8% at 1.3231.

The loonie gained against major currencies after the Bank of Canada kept its key rate unchanged at 1.75%, while suggesting that the current level of policy stimulus remained appropriate.

The economy is operating close to potential and inflation is on target, the bank said in its accompanying statement. However, escalating trade conflicts and its impact are taking a toll on the global and Canadian economies, it added.

The Federal Reserve’s Beige Book, released today, said the U.S. economy expanded at a modest pace through the end of August.

The central bank officials will use the Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, to make their decision on interest rates at the upcoming meeting on September 17 and 18.

The report noted continued concerns regarding tariffs and trade policy uncertainty but said the majority of businesses remain optimistic about the near-term outlook.

The Beige Book also said overall manufacturing activity was down slightly from the previous report, which may add to concerns about manufacturing after Tuesday’s disappointing report from the Institute for Supply Management.

The material has been provided by InstaForex Company – www.instaforex.com