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Forex - Dollar extends losses, hits fresh 3-1/2 month lows

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Investing.com -

Investing.com - The dollar extended losses against a basket of the other major currencies Thursday as the greenback remained under pressure amid uncertainty over how much the Federal Reserve will be able to raise interest rates this year.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was down 0.83% to 96.44, the lowest level since October 23.

The dollar fell sharply on Wednesday after weak U.S. service sector data and dovish Fed comments prompted investors to trim back expectations on the timing of further rate hikes.

The Institute of Supply Management reported that activity in the U.S. services sector slowed to a near two-year low in January.

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.

Investors were looking ahead to Friday's U.S. nonfarm payrolls report for January for fresh indications on the strength of the labor market.

Data on Thursday showed that initial jobless claims rose by a larger-than-forecast 8,000 to 285,000 last week, but remained in territory usually associated with a firming labor market.

The euro and the yen extended gains, with EUR/USD rising 1.07% to 1.1222 and USD/JPY dropping 0.7% to 117.08.

The dollar has now handed 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 pound gave back almost all the day's gains against the dollar to trade at 1.4612 after the Bank of England voted to hold interest rates at current low of 0.5% in a unanimous vote and also cut its forecasts for economic growth.

The commodity linked currencies remained broadly higher, despite oil prices retreating from earlier highs, with USD/CAD down 0.75% to fresh one-month lows of 1.3679.

AUD/USD was up 0.88% to 0.7272 and NZD/USD advanced 0.91% to 0.6723.

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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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