The dollar fell, extending its longest streak of losses since August 2013, on speculation dimming economic growth will slow the Federal Reserve’s on its path to higher interest rates.
The U.S. currency rose from its lowest levels Wednesday after the central bank said “transitory” factors are partly responsible for slower economic growth, and inflation is trending higher. The greenback is heading for its first monthly decline since June, thanks to weaker-than-forecast economic reports that culminated with data showing the U.S. expanded at its slowest pace in a year.
“Those looking for a raise in June may be disappointed,” Douglas Borthwick, head of foreign exchange at New York brokerage Chapdelaine & Co., said by e-mail. “The U.S. dollar remains offered as the market takes on the view that the Fed is still on hold.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, dropped 0.5 percent to 1,165.32 as of 5 p.m. in New York, its lowest closing price in two months. It dropped as much as 1 percent earlier and fell for a sixth straight day.
The dollar has gained 16 percent during the past 12 months, according to the Bloomberg Correlation-Weighted Index, driven by projections the Fed will raise interest rates this year, while central banks around the global add to monetary stimulus.
Traders who pushed the currency to its highest in a decade are now paring those wagers. On Wednesday, the greenback fell 2.2 percent against the Swedish Krona and 1.7 percent versus the Swiss franc.
The U.S. currency pared losses after central bank reiterated it will consider increasing borrowing costs when it has seen further improvement in the labor market and is reasonably confident inflation will return to its 2 percent goal. “Economic growth slowed during the winter months, in part reflecting transitory factors,” the Federal Open Market Committee said in its statement.
Officials held the benchmark overnight fed funds rate in a zero to 0.25 percent range, where it has been since December 2008. They had said last month that they would be unlikely to raise rates at their April meeting.
“The Fed acknowledged soft data, but there is little in the way of forward guidance,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said in an e-mail. “So we’re back to watching data -- together with the Fed.”
Bloomberg’s gauge of the dollar slumped the most in six years after the Fed’s last meeting on March 18, as policy makers reduced projections for interest rates. Estimates for the federal funds rate at the end of 2015 dropped to 0.625 percent, compared with 1.125 percent in December forecasts.
A changed assessment of the economy prompted officials to lower their outlook for borrowing costs, Fed Chair Janet Yellen said at the time.
The economy barely grew in the first three months of the year, hindered by slumps in business investment and exports after oil prices plunged and the dollar surged.
Gross domestic product grew at a 0.2 percent annual pace in the first quarter, down from 2.2 percent for the period through December, Commerce Department data showed Wednesday in Washington. The median estimate of analysts surveyed by Bloomberg before the release called for 1 percent.
The central bank will wait until September to raise borrowing costs, according to 73 percent of 59 economists surveyed by Bloomberg last week.
“It’d been fairly well expected by the market that we were going to have a pretty poor first-quarter GDP print,” said Jennifer Vail, head of fixed-income research in Portland, Oregon, at U.S. Bank Wealth Management, which manages $126 billion. “We’re going to continue to get some pretty noisy data out of the first quarter. However, moving past this month, I would expect the dollar to resume its upward trajectory.”