NEW YORK: The dollar fell across the board on Monday, as investors fretted that the greenback's rapid rise could prompt the Federal Reserve to be a little more cautious about raising interest rates this year.
The U.S. currency has risen about 24 percent against a basket of currencies since May and it could become a key issue at this week's Fed monetary policy meeting.
"The Fed dominates this week, and the concern among some in the market is that the dollar has gone too fast too soon, that this could affect the Fed's inflation goal," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
He added that the overall view is that the Fed will still raise rates sooner rather than later, but that the dollar's sharp gains have given some investors doubts about the timing of the U.S. central bank's tightening.
The dollar index was down 0.9 percent at 99.450.
The greenback was also pressured against the euro after Italy's central bank governor expressed concerns about the pace of its fall to 12-year lows as the European Central Bank launched quantitative easing.
Ignazio Visco, also a member of the ECB Governing Council, told a conference on Saturday that the euro had weakened faster than expected since the ECB first hinted at the program of money-printing last year.
After the first week of QE saw short-term German government bond yields sink deeper into negative territory and the euro slide another 3 percent, he said there were risks the program could overshoot its goal, as well as fuel an excessive rise in asset prices.
The euro gained 1.1 percent against the dollar to $1.0605 in morning trade in New York. Analysts said another push higher for the greenback was unlikely ahead of the conclusion of the Fed policy meeting on Wednesday.
"Visco has been a factor this morning helping the euro," said Josh O'Byrne, a strategist with Citi in London.
"The market is largely going to be quite quiet going into the Fed. The fear is that (Fed chair) Janet Yellen may highlight the dollar as a factor in policymaking and this is a factor supporting position-trimming into it."
The dollar was also down 0.2 percent versus the yen at 121.15.
Comments
Comments are closed for this article.