Dollar at 1-Month Lows as Fed, Trade Concerns Weigh

Thursday,   22-Mar-2018   03:42 PM (IST)

The dollar fell to one-month lows against a currency basket on Thursday after the Federal Reserve raised interest rates but stuck to its forecast for two more hikes this year, while worries over heightened trade tensions also weighed.The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.26% to 89.06, its lowest level since February 19.The index fell 0.74% on Wednesday, its largest one-day decline since mid-January.Some investors had expected the Fed to project three more rate hikes this year so the decision to stick to its forecast for two additional hikes was seen by some as less hawkish than expected.Fed policymakers did lift their 2019 projection to three increases from the two it forecast in December and also indicated that they could raise rates at a slightly more aggressive pace in coming years to keep the strengthening economy from overheating.The dollar was also pressured lower as the threat of a U.S. - led trade war loomed over markets.U.S. President Donald Trump was expected to unveil up to $60 billion in new tariffs on Chinese imports later in the day. The Trump administration already imposed tariffs on U.S. steel and aluminum imports earlier this month.Investors are concerned that major U.S. trade partners could retaliate with similar measures and threaten the outlook for global growth.The euro rose to one-week highs against the U.S. currency, with EUR/USD rising 0.33% to 1.2379.The dollar was near two-week lows against the yen, with USD/JPY down 0.31% to 105.7.The pound rose to one-and-a-half month highs against the dollar, with GBP/USD % to advancing 0.17% to 1.4167.Sterling remained supported after strong UK wage growth data on Wednesday bolstered expectations that the Bank of England could flag a May rate hike after its policy meeting later in the day.