SINGAPORE- The dollar lolled near an eight-month low against its peers on Thursday, as a gloomy US corporate earnings season stoked recession fears and as traders stayed on guard ahead of a slew of central bank meetings next week.
The US dollar index, which measures the greenback against a basket of currencies, last stood at 101.53, languishing near last week’s eight-month trough of 101.51.
Trading was thin on Thursday, with Australia out for a holiday and some parts of Asia still away for the Lunar New Year.
Downbeat earnings and guidance from US corporates and a string of tech sector layoffs have deepened fears of an economic downturn in the United States, leading investors to pare back expectations on how much longer the Federal Reserve will need to aggressively raise interest rates.
“There are now signs the US economy may be slowing in a more meaningful manner,” said economists at Wells Fargo.
“With the Fed no longer leading the charge on interest rate hikes and US economic trends set to worsen, we now believe the US dollar has entered a period of cyclical depreciation against most foreign currencies.”
The Fed’s policy-setting committee will begin a two-day meeting next week, and markets have priced in a 25-basis-point interest rate hike, a step down from the central bank’s 50 bp and 75 bp increases seen last year.
Markets expect policymakers at the Bank of England and European Central Bank (ECB), who will also meet next week, to deliver 50 bp rate hikes. The ECB is seen most likely to remain hawkish.
Sterling was last 0.12 percent higher at $1.2415, while the euro rose 0.05 percent to $1.0920, flirting with its nine-month high of $1.0927 hit on Monday.
“The euro does draw a lot of attention,” said Jarrod Kerr, chief economist at Kiwibank. The euro zone “had a favorable winter …. The energy crisis that people were expecting hasn’t quite played out yet.”
