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Dollar languishes near 10-month low, kiwi tumbles after soft inflation

Reuters  |  TOKYO 

By Hideyuki Sano

TOKYO (Reuters) - The wallowed near a 10-month low against a basket of major currencies on Tuesday, pressured by uncertainty over the pace of the Federal Reserve's policy tightening while weak data knocked the kiwi currency.

The dollar's index against a basket of six major currencies <.DXY> <=USD> sank to a 10-month low of 95.018 on Monday and was last at 95.156 in early Asian trade.

From its 14-year peak of 103.82 touched on Jan. 3, it has lost 8.4 percent.

Friday's weak reading on U.S. and retail sales fanned speculation that the Fed may not have justification for another rate hike by the end of this year, despite policymakers' projection for such a move.

Money market instruments are now pricing in less than 50 percent chance of a rate increase during the rest of the year.

In contrast, central bank policymakers in the euro zone, the UK and Canada have recently signalled they could adjust their policies, with the Bank of Canada raising rates last week for the first time since 2010.

"A lot of countries are catching up with the U.S. in terms of tightening in monetary policy. So it is natural that the dollar is losing its advantage," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The euro held firm at $1.1478, clinging close to its 14-month high of $1.14895 touched on Wednesday.

The European Central Bank is expected to keep its policy on hold at its rates review on Thursday while many investors expect it to signal a reduction of its stimulus in the following policy meeting in September.

The dollar fetched 112.56 yen , having lost steam after hitting a near four month high of 114.495 a week ago.

The dollar slipped 0.6 percent to $0.7278 after data showed consumer price was flat in the second quarter, below the 0.2 percent expected by analysts in a poll, and sharply lower from the 1.0 percent posted in the first quarter.

The Australian dollar traded at $0.7795, after having hit a two-year high of $0.7840 on Monday, supported by data showing robust economic growth in China.

China's economy expanded at a faster-than-expected 6.9 percent clip in the second quarter, setting the country on course to comfortably meet its 2017 growth target.

The data gave a boost to commodity prices, with copper hitting four-month highs.

The Canadian dollar scaled a 14-month high of C$1.2627 on Monday before easing a tad on weak Canadian home sales data. It last stood at C$1.2694 per .

(Editing by Shri Navaratnam)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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