Dollar Lower on Easing Expectations

The U.S. Dollar Index held close to a 2-week trough earlier as investors anticipate that a decline in U.S. Treasury bond yields and a slowdown in consumer inflation rates could pressure the Federal Open Market Committee to act more aggressively. Later today, the Fed will begin a 2-day monetary policy meeting and previous expectations that the Fed might begin to scale back its ultra loose policy have been dismissed in light of the continuing sluggishness of the American economy. The fact that inflation is also slowing has led analysts to believe that the Fed would rather step up existing policy and, in fact, increase asset purchases.

As reported at 4:27 a.m. (BST) in London, the U.S. Dollar Index was trading at 82.189 .DXY, not far from yesterday’s 2-week low of 82.035 .DXY. The U.S. Dollar Index is widely used as a gauge of the greenback’s strength or value relative to a weighted basket of major currencies which includes the Euro, Yen and Pound, among others. The EUR/USD pair traded at $1.3088, a loss of 0.1% following a 0.5% gain on Monday, garnered after news that Italy had finally formed a government. The USD/JPY pair was trading at 97.94 Yen, a gain of 0.2% and moving off of Monday’s 2-week low of 97.35 Yen.