The U.S dollar lost some of its earlier gains recorded on Wednesday, as currency traders retreated from the safe-haven asset, following struggles by the U.S. to reach a consensus on further stimulus measures.
The U.S. Dollar Index that tracks the greenback against a bouquet of other major currencies dropped by 0.02% to trade at 95.090 at the time this report was drafted.
Yesterday saw the U.S. legislative chambers continuing discussions to extend stimulus packages like unemployment benefits, which are due to expire at the end of this month, and provide more funding for America’s schools.
“You could say the dollar is weaker due to a risk-on move,” Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, told Reuters.
This is also coming on the sentiments that European fiscal officials have tentatively reached an agreement on a EUR750 billion stimulus package.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, placed vital attention on the FOMC meeting that many currency traders are keenly waiting for. He said:
“The stock market is exciting, but the monetization proxies are exploding higher and with EU Summit finally over, the market is turning the focus to the July 29 FOMC meeting.
“Recent speeches and statements give traders the impression that the Fed is itching to do something again, just four months since their record interventions in March.
“The FOMC’s appetite to keep the pedal to the metal is staunch. Whether this means an imminent announcement of more formalized and aggressive forward guidance is hard to say. But one thing that I feel safe to say is that USD longs should be a lot more panicky than USD shorts.”
What it means: The U.S. Dollar Index tracks the American dollar against a basket of other major currencies (like the Japanese yen, British pound sterling, Swedish Krona, Euro), Individuals hoping to meet foreign exchange payment obligations, via dollar transactions to countries like Europe, and Japan, would need to pay more dollars in fulfilling such payment obligations.