Dollar falls to its lowest level in more than a year
The US dollar hit its lowest level in more than a year against a basket of major rivals on Friday a day after the European Central Bank’s chief abstained from talking down the euro, while obstacles to US President Donald Trump’s policy agenda also weighed on the greenback.
ECB President Mario Draghi said on Thursday that financing conditions remained broadly supportive, and noted that the euro’s appreciation had “received some attention.” However, he did not cite that strength as a problem nor did he directly try to talk the currency down.
Draghi’s apparent lack of concern about the strengthening euro convinced traders that the central bank remained on track to potentially begin tapering its bond-buying stimulus later this year.
The dollar index touched 93.854, its lowest level since June of last year, and was last down about 0.5 per cent at 93.885. The euro touched US$1.1682, its highest level against the dollar in nearly two years, and was last up 0.4 per cent on the day at US$1.1674.
“The fact that Draghi didn’t necessarily argue too much against the strength of the euro certainly gave the green light for individuals to want to own the currency again or actually add to their positions,” said Dean Popplewell, chief currency strategist at Oanda in Toronto.
The euro was last on track to gain 1.8 per cent for the week, which would mark its second straight weekly rise against the dollar. The dollar index was set to fall 1.3 per cent to mark its second straight weekly decline. Against the yen, the dollar touched more than four-week low of 111.02 yen.
In addition to traders’ expectations that the ECB was staying the course toward tightening monetary policy, investigations into alleged Russian meddling in the US election and possible collusion with Trump’s campaign were viewed as obstacles to the administration’s pro-growth agenda and negative for the dollar.
“Compounding the (weaker dollar) move is this latest news on the political front in the US about the Russia investigation expanding to Trump’s business affairs,” said Alvise Marino, FX strategist at Credit Suisse in New York.
“This is on top of the fact that Senate has not been able to pass anything meaningful on the health care front,” he said in reference to the collapse late on Monday of a Republican effort to overhaul the US health care system.