Dollar down to four week low

Published: 17 Sep at 9 AM Tags: Euro, Dollar,

The withdrawal of Lawrence Summers from the race for the top job at the US Federal Reserve has seen the dollar drop to its lowest level in nearly four weeks. Without the hawkish Summers at the helm it is likely that any moves to tighten up monetary policy by the central bank will be more cautious. The frontrunner for the position as chairman is now the more dovish Janet Yellen.

Recent economic data coming out of the US has been disappointing putting pressure on the greenback. A meeting later in the week at the Fed is expected to result in the bank announcing a modest $10 billion reduction to its massive $85 billion per month bond buying programme.

Having fallen to a low of 80.968, the dollar index has recovered slightly to 81.27. As well as how much tapering it is prepared to do the Fed is being watched by analysts for an indication of how much interest rates are likely to rise in 2016.

A faster pace of rate increases will make the dollar more attractive next to currencies like the yen and the euro, as neither the Bank of Japan nor the European Central Bank appear to be anywhere near reining in their own stimulus programmes.

The euro is currently little changed at $1.3335, and the dollar is worth 99.17 yen.