Sun, Oct 30, 2016 - Page 14 News List

US dollar drops as Fed rate-hike odds fall

Bloomberg and Reuters

The US dollar weakened as futures showed a reduced likelihood of a US Federal Reserve interest-rate increase this year after the FBI said it is reopening an inquiry into Democratic US presidential candidate Hillary Rodham Clinton’s use of private e-mail while US secretary of state.

The greenback fell against most major peers as the chances for the Fed to tighten monetary policy by December dropped from 74 percent to 69 percent, according to fed funds futures data.

The US currency is still on track for the fourth week of gains, its longest winning streak since May.

The politically explosive development less than two weeks before the presidential election extended the US dollar’s losses against the euro and the Japanese yen. The yen rose 1.4 percent this week.

The US dollar on Friday sunk to an eight-day low against the Swiss franc at SF0.9859 per US dollar.

However, the greenback jumped more than 1.3 percent against the Mexican peso to a three-week high of 19.1002 pesos before paring gains, with the pair viewed as a gauge of the likelihood of Republican candidate Donald Trump beating Clinton.

“This could weigh on the US dollar into the election certainly, but that’s dependent on what we hear from the FBI,” said Bipan Rai, a senior foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce in Toronto. “At the very least, we now have another variable to factor in that we had priced out before — political risk.”

The Bloomberg Dollar Spot Index, which measures the US currency’s performance against a basket of 10 major counterparts, fell 0.3 percent at 3:11pm in New York, leaving its weekly gain at 0.2 percent.

The gauge is up 2.2 percent this month.

The US dollar rose earlier Friday as data showed US economic growth picked up in the third quarter after an uninspiring first half of the year.

The currency extended an advance that began in August as signs of economic expansion and accelerating inflation increased the chances for monetary tightening.

FBI Director James Comey, in a letter to eight committee chairpeople in US Congress, said he cannot say how long the agency’s review would take — raising the possibility that Clinton could go into Election Day with the new probe unresolved and still hanging over her campaign.

“The market will be concerned that this tips the balance of risks towards Trump again,” said Shaun Osborne, chief foreign-exchange strategist in Toronto at Bank of Nova Scotia. “I don’t think the market necessarily believes this means Trump will win, but it raises the level of uncertainty significantly.”

In Taipei, the New Taiwan dollar on Friday fell against the greenback, losing NT$0.002 to close at NT$31.639 as foreign investors continued to move funds out of the region, betting on a stronger greenback, dealers said. The currency was little changed from last week’s NT$31.630.

The weakness of the Chinese yuan also weighed on the sentiment in the region, causing traders to cut their holdings in regional currencies, including the NT dollar, dealers said.

Additional reporting by CNA

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