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Dollar edges up from 13-month lows; U.S. political woes weigh

7/25/2017, 10:37:42 AMBasics of Trading
Dollar edges up from 13-month lows; U.S. political woes weigh

The dollar pulled away from a 13-month low against a basket of currencies on Tuesday, trying to shake off a recent selloff after upbeat U.S. economic data as investors awaited this week's Federal Reserve meeting for clues on the timing of its next policy tightening.

But the dollar's outlook remained clouded by worries that persistent political disorder would present obstacles to U.S. President Donald Trump's stimulus and tax reform agenda.

The dollar index, which measures the greenback's value against a basket of six major currencies, last stood at 94.062, having pulled up from Monday's trough of 93.823, its lowest level since June 2016.

On Monday, Markit's flash surveys of U.S. manufacturing and services both came in above expectations, which lifted U.S. 10-year Treasury yields and helped lend support to the greenback, analysts said.

The Fed is widely expected to keep interest rates unchanged at this week's two-day meeting which ends on Wednesday. Investors will be watching for any fresh hints on whether the Fed might raise interest rates again this year, and when it will begin paring its bond holdings.

Any dollar bounce is likely to be limited in the near term, given lingering concerns over U.S. political risks, said Shinichiro Kadota, senior FX strategist for Barclays (LON:BARC) in Tokyo.

"It's not as if the driver for the broad direction of dollar weakness has gone away. I don't think the dollar will keep rising persistently from here," Kadota said.

Jared Kushner, Trump's son-in-law and senior advisor, told Senate investigators on Monday he had met with Russian officials four times last year but said he did not collude with Moscow to influence the 2016 U.S. election.

The ongoing probes into the Russia matter by congressional panels and a Justice Department special counsel, as well as reduced inflation expectations, have weighed on the dollar for much of the month.

Market participants say the investigations have been one factor slowing progress on pushing through Trump's pro-growth agenda of tax cuts and infrastructure spending.

Against the yen, the dollar edged up 0.2 percent to 111.28 yen, inching away from Monday's low of 110.625 yen, the U.S. currency's weakest level since mid-June.

The euro held steady at $1.1638, trading below a 23-month high of $1.1684 set on Monday