© Reuters. The dollar fell in advance of the policy statement of the Fed on Wednesday
Investing.com – The dollar tumbled against a basket of major currencies as economic data showed weakness in the U.S. housing sector is ahead of widely expected unchanged interest rate decision by the Federal Open Market Committee on Wednesday.
The US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.13% to 91.50.
The dollar is under pressure after sales of previously owned homes in the united states unexpectedly fell in August, as tight supply continued to weigh on housing activity.
Sales of existing homes fell 1.7% in August compared to the previous month to an annualized pace of 5.35 m from the house, the National Association of Realtors, said Wednesday. Economists expected an increase of 0.3% to 5.46 million houses.
The data come from a few hours in advance of the conclusion of the Federal Open Market Committee (FOMC) two-day meeting which began Tuesday in the middle of the expectations of the policy-making FOMC will leave interest rates unchanged and to announce plans to start unwinding its $4.5 tn bond portfolio.
As well as the plans of balance sheet unwinding, the Fed’s Summary of Economic Projections and dot plot are supposed to collect a large part of the attention, as investors are likely to assess whether the slowdown in the pace of inflation has changed the central bank’s longer-term interest rates.
“The dollar would likely rally if the Fed was to reiterate the median expectation of a rate hike this year and three in 2018,” said Guy Czar, head of emerging markets strategy societe generale (PA:SOGN), in a note.
At the meeting of the FOMC June meeting, the «dot plot», which is part of the FOMC’s Summary of Economic Projections, indicated that the central bank saw rates on the rise between 1.25% and 1.5% by the end of 2017.
The dot plot shows where each participant in the meeting think that the federal funds rate should be at the end of the year, for the next few years, and in the longer term.
Sterling has been one of the main beneficiaries of the decline in the dollar up to $1.3584, up 0.61%, versus the greenback, after stronger-than-expected retail sales growth in August.
Safe-haven demand, meanwhile, remained moderate cap gains in the yen and the Swiss franc in the wake of President Donald Trump’s threat to the “total destruction” of North Korea if America was forced to defend itself or its allies.
The USD/JPY fell 0.14% to Y111.44 while the USD/CHF has fallen 0.15% to 0.9614.
EUR/USD tacked on 0.09% to $1.2005, while the EUR/GBP fell 0.55% to £0.8834.