© Reuters. The dollar fell ahead of Fed policy statement on Wednesday
Investing.com – The dollar dropped against a basket of major currencies as the economic data showed that the weakness in the US housing sector is expected in front of a largely unchanged interest rate decision from 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 came under pressure after sales of previously owned homes in the U.S. 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 and nursing homes, the National Association of Realtors said on Wednesday. Economists had houses a 0.3% expected rise, 5.46 m.
The data comes just a few hours before the conclusion of the Federal Open Market Committee (FOMC) of the two-day meeting, which started on Tuesday under the expectations of the policy the FOMC left interest rates unchanged, and announced to begin plans for unwinding its $4.5 tn bond-portfolio.
As well as plans for the balance sheet unwinding, the Fed’s summary of Economic projections and dot plot garner is expected to be a lot of attention to assess as investors are eager to whether the has changed, weakening inflation, the Central Bank, the longer-term view on interest rates.
«The dollar would probably rally to repeat if the Fed were, the median expectation for a further interest rate increase this year and three in 2018,» said Guy Stear, head of emerging markets strategy at Societe Generale (PA:SOGN), in a note.
At the FOMC meeting in June, the «dot-plot», part of the FOMC’s summary of Economic projections, which showed that the Central Bank saw rates increase between 1.25% and 1.5% by the end of 2017.
The dot plot shows where each participant thinks the session, the Fed funds rate.at the end of the year, for the next couple of years, and in the longer term
Sterling was one of the main beneficiaries of the collapse of the dollar rose to $1.3584, up 0.61% against the greenback, following stronger-than-expected retail sales growth in August.
Safe-haven demand, meanwhile, remained subdued cap the gains of the yen and the Swiss franc in the Wake of President Donald Trump is threatening to «totally destroy» North Korea, if America was forced to defend himself or his allies.
USD/JPY fell 0.14% to Y111.44 while the USD/CHF fell by 0.15% to 0.9614.
EUR/USD tacked 0.09% to $1.2005, while EUR/GBP 0.55% £0.8834 fell.