US dollar weakens despite interest rate rise

Story link: US dollar weakens despite interest rate rise

The US dollar weakened on Tuesday as the Federal Reserve raised US interest rates by a quarter of a percentage point to 3.5 percent. The greenback fell in relation to major currencies.

In late trading in New York the euro stood at $1.2343 in relation to the dollar. The euro was helped by news that German’s trade surplus had jumped unexpectedly.

The dollar was trading at ¥111.96 against the yen, at $1.7864 against sterling, at $1.2596 in relation to the Swiss franc, and at $1.2129 against the Canadian dollar.

Analysts said that the dollar did not strengthen as would be expected after an interest rate hike because the rise in rates was anticipated and because investors are looking at other factors, including a growing trade deficit. Still, some analysts predict that the dollar will strengthen by the end of the year.

The Australian dollar was also weak. It fell 0.6 percent in relation to the US dollar, to $0.7592, and was down by 0.7 percent to ¥85.09 in relation to the yen, and lost 0.6 percent to A$2.3488 against sterling. Sterling held steady at £0.6914 in relation to the euro and at ¥199.95 against the yen.

Retail sales in the UK were up less in July than they had been in June, but a smaller UK trade deficit game investors hope that growth estimates for the UK economy might be revised upward for the second quarter.