The U.S dollar dropped in value to a more than two-year low amid mixed U.S economic data and expectations that the U.S central bank will continue to suggest that the liquidity spigot remains wide open to support the economy.
At about 3.12 am GMT, the U.S. Dollar Index, used in tracking the greenback’s relative strength against a basket of major currencies, traded at 90.427 points hitting its lowest level since April 2018, as currency traders and global investors digested a regional United States manufacturing report that fell short of the market expectation.
The Empire State manufacturing index dropped 2 points this month to a reading of 4.90, according to the New York Federal Reserve on Tuesday, missing expectations of a 6.90 reading.
What you should know: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc.
- Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries in Europe or Japan would need to pay more dollars to fulfil such payment obligations.
In a note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on the ongoing positivity surrounding UK and EU negotiations to keep the British pound value stronger against the U.S dollar.
“And the dollar is selling off on the same pre FOMC impulse that sees gold higher.
“The British Pound continues to trade more favorably after the UK and EU agreed to go “the extra mile ” and extend the Brexit negotiation. The fact that cable remains bid on dips suggests investors will not position for a no-deal outcome unless it materializes. That, in turn, implies the currency will be well-supported into year-end, the new effective deadline,” Innes stated.
What to expect: However, amid the prevailing situation ongoing at the currency market, a number of currency experts suggest that a faster recovery in the world’s largest economy, in the post-COVID-19 era, versus other major economics will set the dollar up in the midterm.