Greenback gains ahead of Fed decision

Story link: Greenback gains ahead of Fed decision

The US dollar was higher versus the euro and several other currencies Tuesday on predictions that while the Federal Reserve will leave interest rates unchanged in today’s meeting, it will also indicate that inflation is a threat and must be held back.

In addition, while the Institute for Supply Management’s non-manufacturing index remained below 50 in July, signaling that non-manufacturing business in the United States is still contracting, the index was up from 48.2 in June to 49.5 in July.

The greenback traded at $1.5480 to the euro in morning trade in New York, while at the same time the Canadian dollar was down at C$1.0516 to the dollar and the Norwegian krone traded at kr5.1851 to the greenback, both falling to the dollar on declines in oil prices, while the South African rand dropped to $7.3925 to the dollar on declines in the prices for gold and platinum.

The pound weakened in relation to the US dollar on new data from the Chartered Institute of Purchasing and Supply showed that while its services index was up to 47.4 in July, from 47.1 in June, the sector remained in contraction and after the Office for National Statistics said that factory output dropped 0.5 percent in June from May’s levels and was 1.3 percent lower than the same period in 2007.

The news made an interest rate increase this year from the Bank of England unlikely.

The pound traded at $1.9553 to the US dollar but gained ground on the euro, to 79.17p.

Both the Australia and New Zealand dollars declined as the governors of the Reserve Bank of Australia and the Reserve Bank of New Zealand indicated separately that their respective Banks could cut interest rates before the end of the year and after the RBA held interest rates steady at 7.25 percent for the time being, as it had been expected to do.

The Aussie was worth 91.69 cents US at late morning in New York, while the kiwi was at 72.63 cents US and traded at ¥78.479.

The yen saw more gains on the day as it traded at ¥108.1150 to the US dollar and at ¥167.3620 to the euro.