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US Dollar Edges Lower as Uncertainty Towards Trump Looms

February 2, 2017 at 20:58 by Yahia Barakah

Many US hundred-dollar billsThe US dollar moved lower against major rivals on Thursday, pushing an index that tracks the currency’s strength to its lowest level since November 2016. The greenback weakened as the Federal Reserve’s dovish tone in its latest policy statement signaled that no interest rate hike would happen in March.

Currency traders remained reluctant to buy the dollar as uncertainty towards the recently inaugurated president Donald Trump increased following a call between him and the Australian prime minister. The call ended when Trump angrily hung up on Prime Minister Malcolm Turnbull, one of his close allies.

Trump followed the call with a tweet that criticized a deal Obama’s administration had signed with Australia, which relocates 1,250 refugees to the United States. Most of the refugees are from Iraq and Afghanistan, two of the seven countries the US president placed their citizen under a travel ban on January 27. The increasing geopolitical tensions ever since Trump took office are forcing the dollar’s exchange rate to be jittery.

Meanwhile, a statement from the Federal Reserve, which followed a monetary policy meeting that lasted two days, said that the federal funds rate will be left unchanged between 0.5% and 0.75%. The statement pointed out that even though consumer and business confidence improved, business investment remained soft.

The central bank said in December that it expects to raise interest rates three times in 2017. However, traders believe its latest statement signals that there would be no rate hike in March. Markets now forecast there would be two interest rates increases in the current year, with the first one expected to happen in June, according to the CME Group FedWatch Tool.

EUR/USD traded at 1.0757 as of 20:30 GMT on Thursday, from an opening level at 1.0769. The pair rose to 1.0820 at 14:30 GMT, before gradually returning closer to its starting level.

The Dollar Index, which measures the performance of the US currency against a basket of its major rivals, was at 99.80 as of 20:26 GMT. The index touched 99.29 at 11:55 GMT, the lowest level since November 11. From 99.64 yesterday.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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