US Markets

Dollar drops after Fed rate cut, European data beat forecasts

Credit: REUTERS/AKHTAR SOOMRO

The dollar fell to a 10-day low against a basket of major currencies on Thursday as investors evaluated whether the Federal Reserve would continue to cut rates, and after European data beat expectations.

By Karen Brettell

NEW YORK, Oct 31 (Reuters) - The dollar fell to a 10-day low against a basket of major currencies on Thursday as investors evaluated whether the Federal Reserve would continue to cut rates, and after European data beat expectations.

The Fed on Wednesday lowered its policy rate by a quarter of a percentage point to a target range of 1.50% to 1.75%.

It also dropped a previous reference in its policy statement that it would "act as appropriate" to sustain the economic expansion - language that was considered a sign of future rate cuts.

Market participants remain concerned about a slowdown in the U.S. economy as the trade war between the United States and China continues, however, which could force the Fed’s hand.

"The new, slightly shorter, statement tries to keep their options open and puts them back into a data-dependent mode, but circumstances could mean that they have less optionality than they think," said Tim Foster, portfolio manager at Fidelity International in London.

The dollar index .DXY dropped as low as 97.22, the lowest since Oct. 21, before retracing to 97.36, down 0.29% on the day. It rose as high as 98.00 on Wednesday following the Fed decision, its highest since Oct. 17.

Speculators have been cutting their long dollar bets as the U.S. currency holds near historically high levels. Any improvement in global data may weigh on the dollar as investors bet on improving growth in Europe and other regions. IMM/FX

There is a view "that the dollar is expensive and as the global economy might be able to rebound next year, then the bias is to sell the dollar," said Vassili Serebriakov, an FX strategist at UBS in New York.

Data released on Thursday showed euro zone economic growth was unchanged in the third quarter, beating market expectations that it would slow.

In the United States, consumer spending rose in September while wages were unchanged, which could cast doubt on whether consumers would continue to drive the economy.

Payrolls data for October released on Friday is the next major U.S. economic focus.

The Japanese yen gained to a two-week high as optimism that the United States and China would reach a trade deal faded.

Chinese officials have doubts about whether they can reach a comprehensive long-term trade agreement with Washington and U.S. President Donald Trump, Bloomberg reported on Thursday, citing unnamed sources.

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Currency bid prices at 2:15PM (1815 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1143

$1.1148

-0.04%

-2.84%

+1.1174

+1.1132

Dollar/Yen

JPY=

107.9500

108.8300

-0.81%

-2.10%

+108.8900

+107.9400

Euro/Yen

EURJPY=

120.32

121.36

-0.86%

-4.67%

+121.4600

+120.3300

Dollar/Swiss

CHF=

0.9865

0.9892

-0.27%

+0.52%

+0.9895

+0.9860

Sterling/Dollar

GBP=

1.2933

1.2901

+0.25%

+1.38%

+1.2975

+1.2895

Dollar/Canadian

CAD=

1.3166

1.3156

+0.08%

-3.45%

+1.3178

+1.3135

Australian/Dollar

AUD=

0.6886

0.6902

-0.23%

-2.31%

+0.6929

+0.6886

Euro/Swiss

EURCHF=

1.0995

1.1030

-0.32%

-2.30%

+1.1036

+1.0993

Euro/Sterling

EURGBP=

0.8615

0.8641

-0.30%

-4.11%

+0.8647

+0.8602

NZ Dollar/Dollar

NZD=

0.6404

0.6387

+0.27%

-4.66%

+0.6432

+0.6386

Dollar/Norway

NOK=

9.1985

9.1813

+0.19%

+6.48%

+9.2212

+9.1586

Euro/Norway

EURNOK=

10.2523

10.2350

+0.17%

+3.50%

+10.2815

+10.2270

Dollar/Sweden

SEK=

9.6563

9.6517

+0.00%

+7.73%

+9.6670

+9.6203

Euro/Sweden

EURSEK=

10.7607

10.7605

+0.00%

+4.84%

+10.7841

+10.7320

(Additional reporting by Olga Cotaga in London, editing by Larry King and Tom Brown)

((Karen.Brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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