CURRENCIES: Dollar Sinks To 10-month Low Against Euro
June 27 2017 - 3:55PM
Dow Jones News
By Anora Mahmudova, MarketWatch , Rachel Koning Beals
ECB's Draghi hints at early steps away from aggressive
stimulus
The dollar weakened broadly on Tuesday, marking a 10-month low
against the euro, which surged as investors weighed what could be a
shift away from aggressive eurozone stimulus. Meanwhile, a delay of
the health-care bill vote by the U.S. Senate put late-session
pressure on the buck.
GOP lawmakers postponed the vote on the health-care bill to
overhaul Obamacare, after several Republican senators said they
wouldn't vote for the bill in its existing form. The Congressional
Budget Office, a nonpartisan entity, reported that the bill would
leave 22 million people without health coverage, while costs of
premiums and out-of-pocket deductibles would rise.
The ICE Dollar Index , a measure of the currency against a
basket of six major rivals, fell 1% to 96.472, with the euro
representing the largest weighting in the dollar gauge.
"The failure to pass the bill with enough support in the Senate
suggests that the Trump administration is losing political capital
that is needed to pass other policies, such as tax reform and
infrastructure spending. Currency markets views this as a negative
for the dollar," said Alfonso Esparza, senior currency strategist
at OANDA.
The dollar continued to weaken as Federal Reserve Chairwoman
Janet Yellen gave a speech in London on Tuesday, and answered
questions from the audience. Yellen reiterated that rate increase
will be gradual and the Fed will avoid destabilizing markets.
Read:Yellen says another crisis isn't likely in our lifetime:
live blog
(http://blogs.marketwatch.com/capitolreport/2017/06/27/live-blog-of-janet-yellen-address-in-london/)
Philadelphia Fed President Patrick Harker, also speaking in
London, reaffirmed his stance for raising rate one more time this
year.
Fed officials' comments come against the backdrop of persistent
concerns that inflation is running below the Fed's expectations for
a 2% rise.
On data front, U.S. home-price gains pulled back slightly but
remained robust early this year, prompting questions about how
sustainable such a streak can be. Meanwhile, consumer confidence
jumped in June.
The dollar came under early pressure, as the euro surged after
European Central Bank President Mario Draghi said in a speech in
Portugal on Tuesday that changes to the central bank's
accommodative posture may see the ECB move "not in order to tighten
the policy stance, but to keep it broadly unchanged." The comments
made in Sintra, Portugal, were viewed as being less dovish, or
accommodative, than Draghi's earlier speeches by some analysts'
accounts, and jolted the euro to the highest level, above $1.13,
since August, according to data from WSJ Market Data Group.
"There was a very minor nuanced change in his tone, but it was
enough to impact the euro," said Neil Mellor, chief currency
strategist at BNY Mellon.
The euro was most recently changing hands at $1.1346, up 1.4%
compared with $1.1182 late Monday in New York.
"A lot depends on whether a decline in inflation is indeed
temporary, but the biggest risk to taking a positive view of the
economy is Italy. Once the ECB stops buying assets, Italy will be
on its own and the consequence of that is simply unknown," said
Mellor.
In other currencies, the pound was worth $1.2799, up 0.6%
compared with $1.2721 late Monday.
The pound has gained to start the week after U.K. Prime Minister
Theresa May reached a deal with Northern Ireland's Democratic
Unionist Party for its lawmakers to support the Conservatives'
minority government
(http://www.marketwatch.com/story/uks-dup-reaches-deal-to-support-minority-tory-government-reports-2017-06-26).
Against its Japanese counterpart, the dollar strengthened
slightly against the yen, buying Yen112.13, up from Yen111.87 late
Monday in New York.
(END) Dow Jones Newswires
June 27, 2017 15:40 ET (19:40 GMT)
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