NEW YORK: The dollar was lower against the euro and the yen on Thursday, as traders added to bets that the Federal Reserve will cut interest rates next month after New York Fed chief John Williams signalled such a move was possible. The US currency has been under renewed pressure from President Donald Trump’s ramped-up campaign to exert more influence over monetary policy, and as he attempted to fire Lisa Cook, one of the Fed’s governors.
Cook filed a lawsuit on Thursday, claiming Trump has no power to remove her from office.
The buck did trim some of its losses after Thursday’s data showed improvement in jobless claims and gross domestic product expanding slightly more than expected, but it was still treading water.
“The uncertainty surrounding Fed independence continues to weigh on markets, compounded by rising tariffs in India and the prospect of deployment of the National Guard to more cities, drawing scrutiny towards the US,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management. The currency fell against the euro even after France’s prime minister on Monday unexpectedly called a confidence vote for next month, which looks likely to result in the fall of his minority government.
The euro was 0.38% higher at $1.1682. Sterling also rose 0.19 percent to $1.3525. Williams said in a CNBC interview on Wednesday that it was likely rates can fall at some point but policymakers must see what upcoming data indicate about the economy to decide if a cut at the Fed’s September 16-17 meeting is appropriate.
Key among data releases before that meeting are the PCE price index on Friday - the Fed’s preferred inflation measure - and the monthly payrolls report a week later. Traders currently lay around 87.3 percent odds of a quarter-point rate cut next month, according to CME’s FedWatch tool.
“I don’t think we saw any real narrative-changing results from the data,” said Brian Daingerfield, head of G10 FX strategy, NatWest Markets. “We’re looking ahead to the PCE deflator numbers tomorrow, the Fed’s primary read on inflation.”
Trump’s push to place hand-picked, dovish-leaning candidates on the central bank’s decision-making committee also pulled short-term yields lower, even though his attack on Governor Cook could spark a protracted legal battle after she sued to keep her job.
The dollar index, which gauges the currency against six major peers, was down 0.31 percent at 97.862, following two days of declines. Against the yen, the dollar slipped 0.35 percent to 146.89 yen. Japan’s chief trade negotiator Ryosei Akazawa canceled a trip to Washington at the last minute on Thursday, delaying an announcement of the details of Japan’s $550 billion investment pledge in the United States as part of a tariff deal.
A government spokesperson said the decision was taken after talks with the US side revealed some points that need further discussion “at the administrative level”. The dollar slipped to its lowest level against China’s offshore yuan since November, last down 0.42 percent to 7.1219 yuan in offshore trading.
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