US dollar remains under pressure

Published: 24 Jul at 9 AM Tags: Euro, Dollar,

The US dollar has dropped to a one-month low against the euro as investors react to comments that the Federal Reserve could now reduce its programme of bond buying later than expected. Fed chairman Ben Bernanke suggested that interest rates could remain low even if the asset buying was reined in. He also said that any policy shift would remain dependent on the economic outlook.

If the Fed decides to scale back on quantitative easing the dollar will benefit as there will be less money printing by the central bank. The dollar’s woes have been good for the euro, which has hit $1.3238. The single currency has also risen against the yen to 132.47.

The dollar is likely to recover a tad if Chinese manufacturing data, due to be released shortly, should hint at any contraction in the world’s second largest economy.

The Aussie dollar is another currency benefitting from the US dollar’s weakness. The Aussie most recently recovered from a low of $0.8998, recorded on 12 July, to hit $0.93. Consumer inflation data due to be released later in the day will give investors a better idea of whether the central bank will cut interest rates.

Any suggestion that this could happen next month will put pressure back on the Aussie.