The dollar was falling on Tuesday ahead of the release of several indicators that could shed light on the decision of the Federal Reserve (Fed), which is about to hold its monetary policy meeting, where it is likely to lower its rates by half a percentage point. Around 09:30 GMT (11:30 in Paris), the American currency was weakening against the euro, which gained 0.06% to $1.1140, and against the pound, which appreciated slightly by 0.07% to $1.3226.
The foreign exchange market was completely quiet on the first day of the meeting of the Federal Open Market Committee (FOMC), which will make its decision on Wednesday. “The explanation for the weakness of the US dollar is simple: the market considers a large move of 0.50 percentage points by the Fed to be increasingly likely (now more likely than a small move of 0.25 percentage points),” summarizes Ulrich Leuchtmann of Commerzbank. The analyst believes that, generally speaking, “in cycles of interest rate cuts, the Fed is more aggressive than most other central banks,” and that “such phases tend to be particularly negative for the dollar because they make it riskier” to hold.
Retail sales figures expected
August retail sales and industrial production figures, due later Tuesday, are likely to shed light on the state of the U.S. economy after a string of disappointing data in recent weeks. But lower interest rates reduce the profitability of a currency, turning investors away from it. “Rising expectations of faster monetary easing from the Fed” have benefited emerging currencies, including “Asian currencies (which) have outperformed over the past two months, particularly the Malaysian ringgit,” said Lee Hardman, an analyst at MUFG.
The US greenback fell 0.90% against the Malaysian ringgit, to 4.2622 ringgits per dollar. It also fell 0.03% against the Japanese yen, to 140.56 yen per dollar, after hitting its lowest level since late July 2023 against the Japanese currency the previous day.
Tuesday class Monday class
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09:30 GMT 21:00 GMT
EUR/USD 1.1140 1.1133
EUR/JPY 156.59 156.54
EUR/CHF 0.9399 0.9404
EUR/GBP 0.8423 0.8417
USD/JPY 140.56 140.62
USD/CHF 0.8436 0.8448
GBP/USD 1.3226 1.3226
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