US dollar steadies near 6-week low as Fed rate outlook continues to weigh

[NEW YORK] The US dollar hovered near a six-week low against a basket of currencies on Monday, weighed down by last week's interest-rate guidance from the US Federal Reserve that was less "hawkish" than many had expected.

The greenback has been on the retreat since the Fed on Wednesday raised interest rates but stopped short of predicting a sharper pace of monetary policy tightening over the next two years.

"It's follow-through and a hangover from last week - the concept of a dovish Fed," said Brad Bechtel, managing director at Jefferies in New York.

"Even though they hiked (rates), the perception was that they were mildly dovish. We are seeing continuing dollar sluggishness on the back of that," he said.

Group of 20 financial leaders at a meeting expressed renewed concern about the United States' global trade relations and by implication the Trump administration's concern over the strong US dollar.

The post-meeting communique retained language on avoiding currency manipulation, which has previously seemed aimed chiefly at Japan and China, but it omitted a call for free trade seen as opening the door to more overt efforts by Washington to shift the balance of its international relationships.

The US dollar index fell by as much as 0.3 per cent in Asian and early European trading before reversing losses to trade up 0.1 per cent on the day at 100.40.

Public comments from Chicago Fed President Charles Evans who said Federal Reserve was on track to raising interest rates twice more this year, likely helped the greenback rebound, analysts said.

"I think markets are focused on comments made by FOMC members to get a better idea of the path forward for policy and how that will translate for the dollar," said Sireen Harajli, FX strategist at Mizuho in New York.

Meanwhile, sterling fell from a three-week high against the US dollar on news that Prime Minister Theresa May would trigger Britain's divorce proceedings with the European Union on March 29, launching two years of negotiations.

The pound, which had been up as much as a third of a per cent against the US dollar in London morning trade, reversed course, falling as low as US$1.2336 following the statement, down 0.45 per cent on the day.

REUTERS