- Investors await speech by Fed's Powell on Wednesday
- Some markets pricing in negative U.S. interest rates
- U.S. CPI falls 0.8% in April
- Concerns grow about coronavirus re-infections
- Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, adds new comment, updates prices)
The dollar fell on Tuesday as the mood turned cautious a day ahead of Federal Reserve Chairman Jerome Powell's speech on economic issues and as investors weighed the chances of negative U.S. interest rates.
The dollar was not necessarily being driven by safe-haven factors, analysts said, given that U.S. stocks were down and Treasury prices were higher on the day.
"The dollar is still trading within broad ranges and its weakness today could be due to caution ahead of Powell's speech tomorrow and especially given the current talk about negative interest rates," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Although Powell and Fed officials have all but ruled out cutting interest rates below zero, several markets have started to price in such a cut. Fed funds futures on Tuesday priced in negative interest rates of about half a basis point in April 2021.
0#FF: The rate options market implied a 23% probability that the key federal funds rate will fall below zero by end-December, BofA Securities data showed, citing short expiry options on one-year U.S. swap rates. That compares with a 9%-10% probability last week.
In afternoon trading, the dollar index was down 0.3% at 99.959 =USD . The dollar edged lower after data showed U.S. consumer prices dropped 0.8% in April, the largest decline since December 2008 when the economy was in the throes of a recession and marking the second straight monthly decrease in the CPI.
Overall, analysts said risk-taking has been limited by persistent concerns about the global health crisis.
New cases of coronavirus infections have been found in China, South Korea and Germany, where respective governments have eased lockdown restrictions. A re-emergence of coronavirus cases could dent a global economic recovery on the back of an injection of monetary and fiscal stimulus.
The euro was last up 0.4% against the U.S. currency at $1.0848 EUR=EBS , though not far from the $1.0636 low touched at the end of March when the pandemic sent markets into turmoil.
The dollar fell 0.5% against the yen to 107.19 JPY=EBS . The Australian dollar AUD=D3 fell earlier, dipping to a five-day low of US$0.6432 after China banned some Australian meat imports. It later trimmed losses as Australia's trade minister played down the issue as a technicality, and was last down 0.2.% at US$0.6477.
======================================================== Currency bid prices at 4:19PM (2019 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.0847 $1.0806 +0.38% -3.24% +1.0884 +1.0785 Dollar/Yen JPY= 107.1600 107.6600 -0.46% -1.56% +107.6900 +107.1700 Euro/Yen EURJPY= 116.26 116.33 -0.06% -4.67% +116.8300 +115.9600 Dollar/Swiss CHF= 0.9697 0.9729 -0.33% +0.20% +0.9750 +0.9667 Sterling/Dollar GBP= 1.2276 1.2335 -0.48% -7.41% +1.2375 +1.2268 Dollar/Canadian CAD= 1.4056 1.4006 +0.36% +8.24% +1.4064 +1.3972 Australian/Doll AUD= 0.6475 0.6488 -0.20% -7.78% +0.6536 +0.6433 arEuro/Swiss EURCHF= 1.0519 1.0516 +0.03% -3.07% +1.0522 +1.0515 Euro/Sterling EURGBP= 0.8835 0.8759 +0.87% +4.51% +0.8844 +0.8758 NZ NZD= 0.6078 0.6079 -0.02% -9.77% +0.6122 +0.6043 Dollar/DollarDollar/Norway NOK= 10.1540 10.2852 -1.28% +15.67% +10.3627 +10.0950 Euro/Norway EURNOK= 11.0150 11.1344 -1.07% +11.97% +11.1855 +10.9559 Dollar/Sweden SEK= 9.7692 9.8729 -0.70% +4.51% +9.9126 +9.7109 Euro/Sweden EURSEK= 10.5980 10.6732 -0.70% +1.23% +10.7100 +10.5606 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro steady vs dollar but close to March low https://tmsnrt.rs/2WpJ9uM^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
