Dollar Slides as U.K. Tilts Toward ‘Remain’ Before Yellen Speech

El-Erian on Currency Volatility and Fed Credibility
  • Fed chief to address Congress after keeping rates unchanged
  • Pound leaps most since 2008 as stay campaign regains lead

The dollar fell by the most in two weeks against the euro before remarks by Federal Reserve Chair Janet Yellen Tuesday, as polls showed U.K. voters were more likely to choose to stay in the European Union.

The greenback weakened against most of its major peers as Yellen will testify before lawmakers after the U.S. central bank opted to leave interest rates unchanged last week, citing a potential U.K. exit from the EU as a factor in its decision. A U.K. poll suggested Britons will vote to remain Thursday, boosting the pound by the most since 2008.

“The dovish shift from the Fed has the potential to weaken the dollar in the coming weeks, so a ‘Remain’ vote will probably fuel more dollar weakness,” said Alessio de Longis, a New York-based money manager in OppenheimerFunds Inc.’s global multi-asset group, which manages about $5 billion. He spoke in an interview on Bloomberg Television.

The U.S. currency has fallen 2.5 percent this month on expectations that the Fed won’t be able to raise interest rates in contrast with its peers in Europe and Japan, who are carrying out monetary stimulus.

The dollar weakened 0.3 percent to $1.1314 per euro, touching the biggest drop since June 3, and fell 0.2 percent to 103.94 yen at 5 p.m. in New York. The Bloomberg Dollar Spot Index declined 0.6 percent.

There’s “scope for bearish positions to build further” on the dollar, BNP Paribas SA foreign-exchange strategist Michael Sneyd said in a note.

Hedge funds and money managers cut net-bullish bets on the dollar last week to 88,105 contracts, according to data from the Commodity Futures Trading Commission. That follows five weeks in April and May when bearish wagers outnumbered long positions.

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