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Dollar returns to Brexit levels, hovering near 2-year lows vs. euro

Published 2017-07-21, 10:37 a/m
Updated 2017-07-21, 10:43 a/m
Political concerns and pressure from the euro take a toll on the greenback

Political concerns and pressure from the euro take a toll on the greenback

Investing.com – The dollar slumped to a thirteenth-month low against a basket of global currencies on Thursday, following continued concerns over political developments in Washington and while the greenback remained under pressure from a surge in the euro after European Central Bank president Mario Draghi said policymakers would discuss changes to its bond-buying scheme in September.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.26% to 93.85.

That was just off an intraday low of 93.82, its lowest level since the UK voted to leave the European Union, known as Brexit, on June 24, 2016.

Meanwhile, investors are keeping a close eye on political developments in Washington after reports that special counsel Robert Mueller is planning to expand investigations into allegations that Russia meddled in the 2016 U.S. presidential election.

Several news agencies suggested that Mueller could delve into U.S. President Donald Trump’s private business, though the U.S. leader expressed his opinion that investigating his personal finances would be crossing a red line.

The recent reports kept continuous downward pressure on the dollar as market players fretted over how the investigations would sidetrack the implementation of Trump’s fiscal and economic policies.

In the meantime, the strength in the euro also put downward pressure on the dollar as expectations grew that the European Central Bank (ECB) is moving closer to tapering its bond-buying program, after Draghi said on Thursday that the central bank saw signs of “unquestionable improvement” in the euro zone growth and indicated that policymakers would discuss changes to the bank’s ultra-loose monetary policy in the fall.

ECB policymakers now see October as the most likely date to decide on the future of the central bank's asset purchases and consider December, an option flagged by staff, as too late, four sources with direct knowledge of the discussion told Reuters in an article released on Friday.

EUR/USD continued to scale positions on Friday, hitting an intraday high of 1.1677, its highest level since August 24, 2015 when fears of a possible recession in China caused panic in markets.

The single currency also made significant gains against sterling on Friday, with EUR/GBP rising to an eighth month high of 0.8991.

However, the pound did manage to rise against the weak dollar. GBP/USD was last up 0.09% at 1.2986.

Elsewhere, the loonie strengthened on Friday, boosted by a solid reading in Canadian retail sales data. USD/CAD traded down 0.22% to 1.2557.

Dollar weakness was also registered against the yen despite the Bank of Japan’s decision on Thursday to maintain its current loose monetary policy measures. USD/JPY fell 0.63%, to 111.19 on Friday.

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