Asian shares rose on Thursday and the dollar struggled near multi-week lows after weak US economic data added to expectations that the Federal Reserve will delay hiking interest rates. Gloomy figures on regional manufacturing from the New York and Philadelphia Feds also kept a lid on the dollar’s rise. The aim of the program is to get eurozone inflation back toward the ECB’s target of near 2 per cent. Consumer prices dipped back into negative territory on an annual basis last month however, fueling expectations in financial markets that the European Central Bank may have to increase the size or duration of QE.
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The ICE U.S. Dollar index, a measure of the dollar’s strength against a basket of six currencies, was up 0.5% on the day to 94.4030.
National Bank of Austria chief Ewald Nowotny, one of the ECB’s governing council, stressed that inflation is too low and that “it’s quite obvious that additional sets of instruments are necessary”.
“Policy divergence as a driver for the dollar is seen as less tenable in the near term”, said Josh O’Byrne, a G-10 FX Strategist at Citigroup.
Nowotny’s comments contrast with remarks three weeks ago when he said core inflation points to an “equilibrium” in consumer prices, and suggests that policymakers are becoming more concerned about the outlook for the euro area’s fragile recovery.
While the dollar was up against a basket of currencies on Thursday, there was a growing sentiment the strong dollar environment that has dominated the past 18 months is fading. “Generally the theme is still dollar weakness across the board, because the market is pricing out a rate hike this year”, said Thursday Lan Nguyen, a currency analyst with Commerzbank in Frankfurt.
Oil prices fell for the fourth straight day as the US government reported a larger-than-expected crude stockpile build. USA crude was down 1.1 percent at $46.15 per barrel while Brent fell 0.7 percent to $48.81.
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USA interest rates futures implied traders see about a 1-in-4 chance the Fed will raise interest rates by year-end, little changed from on Wednesday, according to CME Group’s FedWatch program. It hit an eight-month low earlier at 118.07 yen before retracing to 118.55 yen, down 0.2 percent from late on Wednesday.
