Dollar on back foot despite Fed signal on rate hikes

LONDON (AFP): The dollar stumbled Thursday despite mounting expectations that the Federal Reserve will speed up interest rate hikes this year, dealers said.

After Janet Yellen’s final meeting as Fed governor, the US central bank’s policy board said Wednesday that while the nation’s inflation remains below target, it expects it to move up this year. The Fed’s comments provided a partial boost for the dollar, although it stumbled during European trading hours. “The dollar did not get the lift we expected from the Fed monetary policy meeting yesterday,” said ADS Securities analyst Konstantinos Anthis on Thursday.

“Even though the central bank made it clear that they see inflation moving higher this year the US currency failed to capitalise on this news.” The greenback is still under pressure against most of its peers as central banks around the world look to tighten monetary policy more in line with the US. European stock markets meanwhile pushed higher after a mixed performance across Asia.

London gains were tempered by the strong pound, which tends to weigh on the share prices of multinationals that earn in currencies other than sterling. The pound rose Thursday against major rivals as dealers shrugged off news of slowing UK manufacturing growth in January.

“The European markets seem in a better mood this Thursday, even if the pound’s gains are preventing the FTSE from matching its eurozone peers,” noted Spreadex analyst Connor Campbell. The FTSE was also dented by telecoms giant Vodafone, which announced a drop in revenue during its third quarter — sending its share price sliding 3.03 percent to 217.80 pence.

Royal Dutch Shell dropped about one percent, despite the energy major announcing that 2017 net profits more than doubled on recovering oil prices.

Looking ahead, eyes were on Friday’s US non-farm payrolls data, with a strong reading likely adding to talk that US borrowing costs will continue to rise.

“If the NFP data support the Fed’s view, we could see the dollar… strengthening further,” noted analyst Naeem Aslam at ThinkMarkets.

In Asia, Tokyo’s main stocks index jumped almost 2.0 percent on a weaker yen and bargain-buying following a six-day losing streak.

Wall Street on Wednesday shook off a recent sell-off as traders reacted to another round of upbeat US corporate earnings. New York indices were buoyed also by US President Donald Trump’s broadly positive State of the Union address that struck a conciliatory note towards the Democrats and called on their support for a $1.5-trillion infrastructure investment plan.