US dollar weakens ahead of Treasury report, rate decision

US dollar weakens ahead of Treasury report, rate decision

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The US dollar was down again on Tuesday in an unexpected sell-off that analysts said had no obvious reason behind it. It was expected that there would be few fireworks the day before the Federal Reserve is set to make a decision on interest rates and ahead of a report from the US Treasury that could call China a “currency manipulator”. Several theories emerged to explain the sell-off, including a plan by the G7 to let the dollar weaken to ease imbalances and a delayed reaction to a report that Iran is considering setting up a market to trade oil in euros.

The greenback dropped 0.5 percent to $1.2754 in relation to the euro. It lost 0.4 percent versus the Japanese yen and sterling, to ¥111.27 and $1.8644 respectively. In addition, the US currency was down 0.6 percent to SFr1.2214 in relation to the Swiss franc and dropped 1 percent to a 28-year low of C$1.1014 versus the Canadian dollar.

According to reports, opinion was mixed on whether the upcoming Treasury report would actually go so far as to name China as a currency manipulator, but the majority seems to be coming around to the consensus that it will not. If the report does label China in this way, some analysts say that the dollar will likely weaken even more than it already has, while Asian currencies will strengthen. In this scenario, the euro and the Swiss franc could benefit.