LONDON: The dollar underperformed on Wednesday, hitting a five-week trough against a basket of currencies, hurt by waning expectations that the Federal Reserve will raise interest rates anytime soon.
The dollar index, which tracks the greenback against a basket of six rivals, edged down 0.15 percent to 93.694 after dropping as low as 93.68, its lowest since May 6.
Against its Japanese counterpart, the dollar fell 0.3 percent to 107.06 yen, after hitting a low of 106.72 earlier. It climbed from those lows after data showed that China's imports beat forecasts in May, adding to hopes that the there economy may be stabilising.
Nevertheless, traders are convinced the dollar will struggle to gain higher ground unless incoming data beats expectations. Investors have almost priced out the chance of a rate increase at the Fed Reserve's June 14-15 policy review, and reduced the likelihood of a July rate hike to around 26 percent.
With worries about Brexit also gathering, investors are uncertain whether the Fed will raise rates in the near term.
"The dollar continues to remain soggy with June priced out and chances that the Fed will move in July waning. Investors will need some good payrolls data and signs of inflation picking up, before they are convinced that a rate hike in September is on the cards," said Jane Foley, senior currency strategist at Rabobank.
Earlier this week, Federal Reserve Chair Janet Yellen did not specify whether the Fed would raise rates over the summer. That kept pressure on the dollar which had weakened substantially after the US nonfarm payrolls report on Friday showed the slowest job growth in more than five years in May, quashing expectations for a hike during the summer.
"In our view, the timing of the next Fed rate hike will depend on the economy continuing to progress, the labour market strengthening further and inflation moving back towards it 2 percent target," said Richard Falkenhall, currency strategist at SEB. The bank expects the Fed to raise rates in July.
The dollar's weakness saw the euro gain 0.15 percent to $1.1370 on a day when the European Central Bank kickstarted its corporate bond-buying programme as part of its quantitative easing plan.
The single currency also shrugged off a drop in German yields, having closed the past two days almost flat after its 2 percent surge on Friday. Investors are not too keen to buy the single currency amid worries that the euro zone is likely to struggle if Britain votes to leave the European Union.
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