The US dollar fell on Friday from its three-week highs in the previous session as traders’ focus shifted to the US Federal Reserve’s policy meeting next week, when the US central bank is expected to leave interest rates unchanged.
“While the Fed next week may not sound overtly dovish, its tone might emphasize caution and thus do little to alter very low expectations for policymakers to raise rates this year,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The Fed raised interest rates four times last year and has signaled it will probably lift borrowing costs twice this year, although some central bank officials have said they will be patient in raising rates.
In Taipei, the New Taiwan dollar rose against the US dollar, adding NT$0.060 to close at NT$30.825, little changed from last week’s NT$30.841.
In mid-morning trading on Friday, the US dollar index was down 0.6 percent at 96.046, after climbing to a three-week high of 96.676 on Thursday. It ended Friday down 0.8 percent at 95.81, posting a weekly loss of 0.5 percent.
The US dollar’s decline also coincided with a rally in US stocks, which were bolstered by upbeat earnings.
The euro, on the other hand, rebounded on Friday, steadying after a dovish European Central Bank President Mario Draghi failed to alter an already downbeat assessment on the eurozone’s economy.
Draghi on Thursday said that a dip in the eurozone’s economy could be more pronounced than thought a few weeks ago, comments seen as signaling a delay in the bank’s first interest rate hike.
The euro on Thursday weakened broadly on those comments and fell to a two-month low of US$1.1286 against the US dollar.
However, on Friday, the single currency recovered, rising 0.7 percent to US$1.1379.
“A relatively dovish performance from Draghi was already priced in,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S.
The euro has traded in a range of US$1.12 to US$1.16 for the past three months and analysts expect it to underperform in the near term as monetary policy is expected to remain accommodative for now.
Sterling reached an 11-week high on Friday after a report in the Sun newspaper that Northern Ireland’s Democratic Unionist Party had privately decided to offer conditional backing for British Prime Minister Theresa May’s Brexit deal next week.
The report pushed the pound 0.4 percent higher to US$1.3139, its highest level since Nov. 9 last year.
Sterling has risen about 1.8 percent this week, moving above US$1.30 to the US dollar on hopes Britain will avoid a “no deal” Brexit on March 29.
Additional reporting by CNA
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