TOKYO- The dollar nursed losses on Thursday, holding near a three-week low against a basket of currencies as US bond yields pulled back from last month’s surge with investors buying the Federal Reserve’s arguments that interest rates can stay low.
The dollar index dipped to a four-week low of 91.571 overnight and last stood at 91.601.
The euro traded at $1.19845, near its highest level in four weeks and having gained 2.2 percent so far this month.
The dollar changed hands at 108.93 after hitting a three-week low of 108.755 on Wednesday.
“The dollar has been losing steam a bit in line with falls in US bond yields as the Fed has maintained it dovish stance,” said Yujiro Goto, chief currency strategist at Nomura Securities.
Repeated assurances from Fed officials that it will keep interest rates low have helped stabilize US bonds, especially at the short end of the market.
While many investors remain nervous the Fed could change its tone later this year if inflation readings swing much higher than expected, for now they are content to give the Fed the benefit of the doubt.
Ten-year US bond yields eased to 1.636 percent, well below a 14-month peak of 1.776 percent hit late March, reducing the dollar’s yield attraction.
Fed Chair Jerome Powell said on Wednesday that the US central bank will reduce its monthly bond purchases before it commits to an interest rate increase, a scenario many investors have regarded as a given.
A weaker US dollar also saw commodity currencies supported. The Australian dollar stood at $0.7724 near Wednesday’s three-week high, having broken out of its tight trading band over the last few weeks. – Reuters
