The dollar found a little support on Thursday. The Federal Reserve gave no real clues about its next moves, beyond an expected promise to keep its policy easy. A new rise in coronavirus infections hinders the U.S. economic recovery.
Some traders had speculated that the Fed might loosen its approach to inflation, they now think that it may happen at the agency’s next meeting in September.
The dollar index rebounded by about 0.4% from a two-year low. On the other hand, the risk-off currencies fell on Thursday.
The Australian dollar tumbled down by 0.8% to $0.7132, while the kiwi lowered by 0.7% to $0.6623. Nervousness about global tensions with China added to pressure on the Antipodean currencies.
Sino-U.S. relations have further deteriorated over issues like the pandemic and Beijing’s territorial claims in the South China Sea, as well as its clampdown on Hong Kong. The yuan was under pressure as well. It lowered to 7.0055 on Thursday.
Meanwhile, the Japanese yen plummeted down by 0.3% to 105.24 per dollar. However, it edged higher against other majors as the sentiment stayed cautious. Traders’ focus turned to forthcoming U.S. and European data along with a U.S. fiscal rescue package.
Moh Siong Sim, the currency analyst at the Bank of Singapore, noted that the excitement coming up to the Fed meeting had died down after the meeting turned out very much as expected. The greenback is slipping into a bit of a trading range. He thinks that some sort of consolidation is due after the dollar weakness over the past one or two weeks.
How did the Euro fare?
The Euro also declined by 0.3% to $1.1745 on Thursday. However, it has rallied by 4.7% against the dollar in July.
Carol Kong, the FX analyst at the Commonwealth Bank of Australia in Sydney, stated that European confidence figures might support analysts’ view of the economic divergence between the eurozone and the U.S., and that supports further gains in the euro.
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