U.S. Dollar Falls After Weak Data; Upcoming Fed Meeting in Focus
The U.S. dollar continued to slide on Monday in Asia following the release of weaker-than-forecasted economic data.
The U.S. dollar index that tracks the greenback against a basket of other currencies edged down 0.1% to 96.48. The index shed 0.8% last week, the biggest loss since late August.
The fall in the dollar came after data showed on Friday that U.S. manufacturing output fell for a second straight month, while factory activity in New York State was weaker than expected this month. The data extended a recent streak of weak economic reports and underlined the case for the Fed’s patient stance on further rate hikes this year.
In its policy meeting this week, the Federal Reserve is expected to keep rates unchanged, and to revise its plan for a median projection down to just one rate hike this year.
The central bank might also announce the end of asset roll-off from its balance sheet, analysts said. The decision is due Wednesday.
In other news, investors continue to wait for a breakthrough in U.S.- China trade. A report by Xinhua news agency raised hopes of a potential trade deal after the state-owned newspaper said last Friday that the two sides have made progress toward striking an agreement.
The USD/CNY pair traded near flat at 6.7125. The People's Bank of China (PBOC) set the yuan reference rate at 6.7088 vs Friday's fix of 6.7167.
The GBP/USD pair was unchanged at 1.3288. The pound ended last week at 1.3296, up 2% for the week, the biggest gain since late January after the U.K. parliament voted to seek a delay in Britain’s exit from the EU, following a decision to avert a no-deal Brexit.
Looking ahead, the Bank of England is expected to hold steady at the end of its meeting on Thursday.
The European Union (EU) summit on Thursday will also be closely watched, as traders wait to see if it agrees to an extension to the Brexit deadline and whether it presses Britain for a delay of one year or more.
The USD/JPY pair edged up 0.1% after the Bank of Japan kept monetary policy steady but tempered its optimism that robust exports and factory output will underpin growth.
The AUD/USD pair rose 0.3%. The Reserve Bank of Australia is due to publish the minutes of its latest policy-setting meeting on Tuesday.