US dollar index hits 15-month low on Fed, political uncertainty

NEW YORK: The US dollar briefly touched a 15-month low against a basket of major currencies on Tuesday on political turmoil in Washington and weak US economic data that kept the Federal Reserve's policy outlook uncertain.

The dollar was last higher on the day as investors consolidated positions, but it was still not far from its lowest in more than a year against major rivals as political uncertainty was expected to continue weighing on the greenback following President Donald Trump's ouster of White House communications chief Anthony Scaramucci on Monday.

Market concerns also persisted about whether the Fed would raise interest rates again this year. Traders' bets last reflected a roughly 46 percent chance of a Fed rate hike in December, according to CME Group's FedWatch tool.

The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.2 percent at 93.060 after touching 92.777, the lowest since early May 2016.

The dollar index fell in July, its fifth consecutive monthly decline, the longest such stretch since December 2010 through April 2011. On a monthly basis, it was the biggest drop since March 2016.

"It's all about negative dollar momentum," said Vassili Serebriakov, FX strategist at Credit Agricole in New York. "If you're short the dollar, the move has been playing out in your favor and there is little reason to change the view."

Weak US construction spending and auto sales added to the dollar's troubles, Serebriakov added.

The US Commerce Department said construction spending fell 1.3 percent in June to the lowest since September 2016. Economists polled by Reuters had expected construction spending to increase by 0.4 percent.

US carmakers said on Tuesday they continued to pare back on sales to daily rental fleets in July.

The dollar was last up slightly against the Japanese currency at 110.32 yen. The greenback earlier fell below 110 yen for the first time in more than six weeks, touching 109.94 yen.

The euro was down 0.3 percent against the dollar at $1.1800 , but not far from a 2-1/2-year high of $1.1845 touched on Monday.

"Policy uncertainty in the US I think has been the biggest driver of declines in the dollar recently," said Sireen Harajli, FX strategist at Mizuho in New York. "Any positive effect from the election of President Trump I think at this point has been priced out."