The US dollar fell broadly on Friday in the wake of cautious comments from two US Federal Reserve officials about global economic growth, while sterling rose following losses tied to fears about a Brexit deal.
The greenback fell to one-week lows versus the euro and a two-week trough against the yen following comments from Fed Vice Chair Richard Clarida, who told CNBC television that he saw some evidence that global growth was cooling.
Clarida also said key US short-term borrowing rates are close to neutral and said being at neutral “makes sense.”
Traders perceived his comments to mean the No. 2 Fed official might be open for the Fed to pause its rate-hike campaign sooner than previously thought.
“You have seen a dovish tilt from some Fed officials. That put pressure on the dollar,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
Separately, Dallas Fed President Robert Kaplan said on Fox Business that global growth will be a bit of a headwind, which might spread to the US.
Clarida and Kaplan’s remarks spurred selling in the US dollar, which fell 0.7 percent against the euro at US$1.141, down 0.8 percent for the week.
Against the yen, the greenback fell 0.7 percent to ￥113.14 on Friday, down 0.6 percent for the week.
In Taipei, the New Taiwan dollar fell NT$0.043 against the US dollar to NT$30.888, down 0.25 percent from last week’s US$30.812.
Chicago Fed President Charles Evans acknowledged some economic risks ahead, but also raised the probability that the Fed could raise rates above what would be neutral if US data come in stronger than forecast.
The pound briefly recovered against the euro following its worst day versus the single currency in about 25 months, as British Prime Minister Theresa May clinched backing from some key Brexit supporters with her draft plan for Britain to leave the EU in March next year.
A string of UK Cabinet ministers quit on Thursday in protest over the terms in May’s Brexit proposal.
The resignations sent the pound reeling. Sterling was on Friday up 0.42 percent versus the US dollar at US$1.2829, but was down 0.31 percent versus the euro at 88.945 pence.
The euro was also bolstered by hopes that Italian Prime Minister Giuseppe Conte was looking to work with the EU over his government’s 2019 budget, which has been rejected by Brussels.
Currency traders are monitoring signs that Washington and Beijing are seeking to de-escalate their trade dispute.
US President Donald Trump said he might not impose more tariffs on Chinese imports if China comes up with terms that he and Beijing could agree on.
The yuan in offshore trading edged up 0.13 to 6.92 per US dollar.
Additional reporting by CNA
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