US dollar exchange rate drops for third day as experts fear economy losing momentum

US dollar exchange rate drops for third day as experts fear economy losing momentum

Market watchers believe the world’s biggest economy is losing momentum (Image: Drew Angerer/Getty)

On Friday, Mr Powell told the American Economic Association that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.

Against a basket of its rivals, the dollar declined a quarter of a percent to 95.92, nearing a 2½ month low hit last week.

“Growing expectations that the Fed will pause on its rate hike cycle is weighing on the dollar and that will be a big factor in the coming days,” said Lee Hardman, an FX strategist at MUFG in London.

The dollar outperformed other currencies in 2018 due to the Fed being the only major central bank to hike rates. If the Fed holds rates in 2019, analysts see slim chances of further greenback appreciation. Money markets expect no more rate hikes from the Fed this year.

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The euro and the Australian dollar led gainers with the latter also benefiting from the weekend news of growing policy stimulus in China.

After a slew of weaker-than-expected manufacturing data, Chinese authorities on Friday cut reserve requirements for all banks by 100 basis points. The move frees up $116 billion for new lending as it tries to reduce the risk of a pronounced fall in the pace of economic growth.

The Australian dollar, whose fortunes are closely correlated with China, gained half a percent to $0.7140.

The dollar advanced 0.2 percent versus the offshore yuan to 6.8483.

Financial markets are also optimistic about US officials meeting with their counterparts in Beijing this week for the first face-to-face talks since President Donald Trump and President Xi Jinping on December 1 agreed to a 90-day truce in their trade war.

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