US dollar falls as China move seen delaying Fed rate hike

[NEW YORK] The dollar fell against the euro and other currencies on Wednesday on speculation that the US Federal Reserve will delay hiking interest rates following China's devaluation of the yuan.

"The dollar took it on the chin," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Beijing on Tuesday surprised global financial markets by devaluing its currency, the yuan, by nearly two per cent against the US dollar.

A second cut on Wednesday brought reductions this week in the yuan to 3.5 percent against the dollar.

The dollar had advanced against most rival currencies on Tuesday. But on Wednesday, the greenback declined against the euro, the British pound and the Japanese yen.

"China's cheapening of its currency opened a messy can of worms for markets and suggested the global economy may be worse off than previously thought," Mr Manimbo said.

"Consequently, expectations have diminished for the Fed to raise rates amid fears that slowing growth in China could reach US shores."

Currency traders are closely eyeing US data the rest of the week, especially Thursday's report on US retail sales for July.

A strong report could strengthen confidence that the Fed will hike rates in 2015, perhaps as soon as September.

AFP