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Dollar Extends Slide

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Dollar Extends Slide

After plunging to a new multi-year low in the Asian session, the U.S. dollar gradually recovered and stayed higher for a brief while after the Federal Reserve announced its monetary policy.

Rising hopes that the U.S. lawmakers will eventually agree on a fiscal weighed on dollar. Fairly encouraging euro area economic data too contributed to dollar’s weakness.

the Fed announced its widely expected decision to leave interest rates unchanged while also revealing plans to continue its asset purchase program until the economy shows substantial progressed towards the central bank’s goals of maximum employment and price stability.

The Fed said it decided to keep the target range for the federal funds rate at 0 to o25%, which is where the target range has remained since an emergency rate cut in March.

The accompanying statement reiterated that the Fed plans to keep rates at near-zero levels until labor market conditions have reached levels consistent with maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

The Fed said it expects the economy to shrink by less than expected in 2020 and grow by slightly more than expected in 2021 and 2022.

Data from the Commerce Department showed that retail sales tumbled by 1.1% in November following a revised 0.1% percent dip in October.

Economists had expected retail sales to slip by 0.3% compared to the 0.3% increase originally reported for the previous month.

Excluding a decrease in sales by motor vehicle and parts dealers, retail sales still fell by 0.9% in November. Ex-auto sales were expected to inch up by 0.1%.

The dollar index slid to 90.13 in the Asian session, rose to 90.70 this afternoon after the Federal Reserve announced its policy. It subsequently retreated and was last seen at 90.32, down 0.16% from previous close.

The Euro was stronger by nearly 0.3%, fetching $1.2188 a unit, recovering from $1.2127 touched soon after Fed’s policy statement.

Against Pound Sterling, the dollar weakened to $1.3500, sliding from $1.3466. UK consumer price inflation slowed to a three-month low in November, weakening to 0.3% from 0.7% in October, data from the Office for National Statistics showed Wednesday. Economists had forecast the rate to come in at 0.6%.

European Commission President Ursula von der Leyen said that Britain and the EU have moved closer to sealing an agreement, and that the next days were going to be decisive. The bloc’s chief also noted that issues linked to governance have been resolved, while the level playing field and fisheries remain the sticking points in the talks.

The Yen firmed up to 103.47 a dollar, gaining about 0.2%. For a brief while, the dollar prevailed over Yen, when the Japanese currency weakened to 103.92.

The Aussie was stronger at US$0.7572, firming up from US$0.7559.

The Swiss franc was little changed at CHF0.8856, while the Loonie weakened to $1.2749, sliding 0.4% from previous close.

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