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Dollar dips against yen, kiwi weakens after RBNZ

2017-5-11 16:08:32Market Analysis
Dollar dips against yen, kiwi weakens after RBNZ

The dollar steadied against the yen after dipping early Wednesday as U.S. President Donald Trump’s shock firing of FBI Director James Comey piqued investors' aversion to risk.

His dismissal saw Democrats immediately accuse Trump of having political motives, raising investors’ fears that the ensuing political turmoil could derail Trump’s promised tax reform and stimulus program.

But demand for the greenback continued to be underpinned by expectations for a rate hike by the Federal Reserve next month. Markets are pricing in around an 80% chance of a hike at the Fed's June meeting, according to Investing.com’s Fed Rate Monitor Tool.

The euro edged higher, with EUR/USD rising 0.1% to 1.0877.

On Wednesday, European Central Bank President Mario Draghi said it is too early for the central bank to declare success in its quest to spur inflation in the euro area despite signs the bloc's economic recovery is gaining traction.

The remarks indicated that the ECB is in no rush to raise interest rates or wind down its stimulus program.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, edged down to 99.43.

Sterling was flat ahead of the Bank of England’s interest rate decision and inflation report later in the day, with GBP/USD at 1.2934. The BoE was expected to keep monetary policy on hold.

Meanwhile, the New Zealand dollar weakened after the Reserve Bank of New Zealand held its benchmark interest rate at 1.75% on Thursday and indicated that a tightening of monetary policy was further away than markets had anticipated.

The Canadian dollar was also lower, with USD/CAD rising 0.45% to 1.3716 after ratings agency Moody's downgraded the long-term ratings for six Canadian banks on Wednesday, citing a more challenging operating environment for banks in Canada for 2017 and beyond.