Dollar Slides to Near 3-Month Low as Fed Rate Move Seen on Hold

  • Currency remains lower even as Dudley cites jobs, wage gains
  • Policy makers seem more convinced inflation not on the rise

The dollar slid to almost a three-month low as traders doubted the resolve of the Federal Reserve to raise interest rates any time soon.

The currency slid for the fourth time in five days after minutes from the central bank’s July meeting showed officials were divided over the urgency to raise interest rates again. Traders see a 20 percent chance of a rate hike at the Fed’s September meeting, even as Fed Bank of New York President William Dudley said strong jobs gains reinforced his view that wages are starting to move higher.

“There’s some level of momentum that’s been built into dollar weakness this year, tied to Fed expectations,” said Phillip Nelson, Boston-based director of asset allocation at NEPC LLC, a consultant that advises corporations, pension funds and endowments managing $925 billion.

The greenback has slumped almost 6 percent this year as Fed policy makers agree there’s not much risk of inflation running away from them anytime soon. That means the U.S. central bank is less likely to diverge from the paths of the Bank of Japan and European Central Bank, which are boosting monetary stimulus as they seek to spur flagging growth.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 peers, fell 0.6 percent as of 5 p.m. in New York. The U.S. currency declined 0.6 percent to $1.1354 per euro and dropped 0.4 percent to 99.89 yen.

The currency rose Wednesday on indications from Dudley and Atlanta Fed President Dennis Lockhart that officials might lift borrowing costs as soon as next month. Those gains have since evaporated.

“The U.S. dollar has remained under pressure across the board,” Jennifer Hau, a foreign-exchange strategist at Credit Agricole SA in London, said in a note. “The Federal Open Market Committee minutes disappointed those looking for a more explicit hawkish signal.”

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