The US dollar headed for its steepest three-week slide in more than four years as an increasingly cautious US Federal Reserve spurred analysts and investors to reassess forecasts for the greenback.
A Bloomberg index tracking the US currency against 10 major peers climbed from an eight-month low reached on Friday, two days after Fed officials unexpectedly cut projections for interest-rate increases to two this year from the four they estimated in December.
“The fact that they didn’t raise rates and wound back expectations for future increases in 2016 has obviously hurt the US dollar,” said Derek Mumford, a director at Rochford Capital Pty in Sydney. “That can continue in the very near term.”
The Bloomberg Dollar Spot Index rose 0.2 percent to 1,185.52 as of 6:28am in New York, having fallen earlier to 1,180.83, the lowest since June 30. It has dropped 3.7 percent since Feb. 26, poised for the biggest three-week slump since October 2011. The greenback has depreciated at least 0.4 percent against all of its G10 peers since March 11.
The Fed meeting prompted investors to question whether the US dollar’s rally has run out of steam. Bloomberg’s gauge had climbed 37 percent between its 2011 low and the closing peak reached on Jan. 22 this year, as the promise of superior economic growth and rising interest rates contrasted with sluggish economic activities elsewhere.
“In terms of the relative difference in interest rates, the rally is over,” Wells Fargo Securities LLC chief economist John Silvia said in an interview on Bloomberg Television. “The Fed has said we’re not going to be pushing this game like we were expected too.”
JPMorgan Chase & Co lowered its year-end forecast for dollar-yen to ￥103 from ￥110 the same day. The median estimate is ￥120 among more than 60 analysts surveyed by Bloomberg.
The US dollar was little changed at ￥111.38 on Friday, on track for a 2.2 percent slide this week. It reached ￥110.67 on Thursday, the lowest since October 2014. The greenback gained 0.4 percent on Friday to US$1.1268 per euro, paring its weekly decline to 1 percent.
NT DOLLAR SURGE
In Taipei, the US dollar fell against the local currency on Friday, shedding NT$0.186 to close at NT$32.520, a five-month low. That was also down from NT32.95 on Friday last week.
The Fed’s dovish stance on rate cuts, foreign funds inflow into the local equity market and the People’s Bank of China’s raising of the yuan’s reference rate against the US dollar sparked more selling of the greenback in the region and gave additional support to the NT dollar, dealers said.
According to the Taiwan Stock Exchange, foreign institutional investors bought a net NT$17.497 billion (US$538 million) worth of shares on Friday, sending the weighted index 0.87 percent higher at the close.
Dealers said that not only local exporters, but also foreign banks operating in Taiwan rushed to raise their holdings in the NT dollar by dumping the US dollar, betting a weaker greenback.
The greenback dropped below the NT$32.4 mark, but central bank intervention helped lift it up toward the close, they said.
POUND
While the pound declined against most of its G10 counterparts this week, it gained versus the US dollar, which was undermined by the Fed’s decision to raise interest rates more slowly.
A day after the Fed meeting, the Bank of England (BOE) said rates would more likely than not rise in the next three years, dampening speculation that some officials were leaning toward a cut — spurring the sterling to its best one-day gain versus the US dollar since 2009. However, against other currencies, the “Brexit” debate weighed on the pound.
The pound was little changed at US$1.4491 as of 5:13pm in London, leaving its weekly advance at 0.8 percent. On Thursday, it gained 1.6 percent.
Sterling depreciated 0.3 percent in the week to ￡0.7778 per euro, and slid 1.3 percent against the yen.
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