Dollar weakens as investors await signs of rate hike

THE DOLLAR weakened yesterday as investors awaited signals from the Federal Reserve on whether the US central bank will stick to its guns and raise rates this year, while firmer commodity-related shares helped to limit losses across major stock indices.

The Fed’s chairperson, Janet Yellen, was scheduled to take part in a discussion in London late yesterday. Investors expected her to underline her positive view on the US economy, which would support the Fed’s forecast of a rate hike this year.

But softer-than-expected US data overnight gave rise to some caution. New orders for key US-made capital goods unexpectedly fell in May and shipments also declined, suggesting a loss of momentum in the manufacturing sector halfway through the second quarter. US stock futures were off 0.1%. The dollar fell 0.1% against a basket of six major currencies, although it hit a fiveweek high against the Japanese yen.

Fed officials have stuck to their hawkish scripts, in stark contrast to the firmly dovish view expressed by Mario Draghi, the president of the European Central Bank (ECB), against exiting super-easy monetary policy too quickly.

Draghi reiterated his views at an ECB conference in Portugal, but also highlighted the recovery in the euro zone.

His comments helped bond yields in the single-currency bloc to nudge higher and lifted the euro to a nine-day high.

European stocks gave up some of their gains from the previous session, dragged lower by weakness in consumer-related stocks.

More broadly, firmer metals and oil prices, as well as upbeat data on Chinese industrial profits, helped mining shares to recover their recent losses.

Brent crude futures, the international benchmark for oil prices, gained 1.2% to $46.39 (R568.87) a barrel, while US West Texas Intermediate crude futures rose 1% to $43.83 per barrel.

Gold prices, which tumbled to their lowest level in nearly six weeks on Monday after large sell order sent ripples through the market, steadied, supported by an easing dollar.

Spot gold was up 0.6% to $1 251.21 an ounce. – Reuters