With prospects of a Fed interest rate hike fading any time soon, the U.S. dollar remained sluggish Tuesday, hovering at three-week lows against most other currencies.
The dollar index DXY which tracks the U.S. currency against a basket of six major currencies, moved slightly higher in early Asian trade to 94.893, but remained close to its overnight low of 94.619.
According to Kathy Lien, managing director of FX Strategy for BK Asset Management, "More investors are starting to believe that the Federal Reserve could delay lift-off until 2016 and this view is weighing heavily on the currency.”
Two More Fed Meetings
With only two more policy meetings scheduled by the Fed for 2015-Oct. 27-28, and one in December--many foreign exchange strategists are concerned that a continued delay in initiating a rate hike will significantly add risk to the dollar.
The dollar was up at 120.05 against the yen, in the center of its range against the Japanese unit while the euro was steady at $1.1355, after climbing to a three-week peak of $1.1397 on Monday.
Lien continues to believe that the Fed has only delayed and not canceled its plans to raise interest rates for the first time since 2006. But for the short term, she doesn’t expect the dollar to strengthen anytime in the coming weeks.
The U.S. bond markets were closed on Monday due to the Columbus Day holiday and market activity was light. Monday was also a national holiday in Japan.