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Forex - Dollar on defensive after broad decline on rate hike doubts

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Investing.com -

Investing.com - The dollar slid lower against the euro and the yen on Thursday in the wake of a broad decline in the previous session after weak U.S. service sector data added to doubts over how much the Federal Reserve can raise interest rates this year.

EUR/USD was up 0.19% to 1.1125, not far from Wednesday's three-and-a-half month highs of 1.1145.

The euro ended that session with gains of 1.59% after the Institute of Supply Management reported that activity in the U.S. services sector slowed to a near two-year low in January.

The report prompted concerns that weakness in manufacturing may be spreading to other sectors.

The weak data, along with dovish comments by a Federal Reserve official added to doubts over how much the Fed can raise rates this year.

New York Fed President William Dudley said the weakening outlook for the global economy and any further strengthening of the dollar could have "significant consequences" for the health of the U.S. economy.

The dollar edged lower against the yen, with USD/JPY dipping 0.07% to 117.82, not far from the lows of 117.04 hit on Wednesday.

The dollar has now given back all of the gains made in the wake of last Friday's shock decision by the Bank of Japan to adopt negative interest rates.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, dipped 0.12% to 97.12, not far from the three month trough of 96.89 set on Wednesday.

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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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