US Dollar Declines After FOMC Member Says He Is Worried

Charles Evan’s turned US dollar bulls on their ear last evening with his surprise comments. Bloomberg reports that The Federal Reserve’s policy meeting this month, at which it’s widely expected to raise interest rates for the first time in nearly a decade, has become a source of apprehension for Chicago Fed President Charles Evans.

“I admit to some nervousness about our upcoming decision,” Evans, a 2015 voter on the policy-setting Federal Open Market Committee, said Tuesday in a speech in East Lansing, Michigan.

Evans, among the most dovish of Fed policy makers, reiterated that he “would prefer to have more confidence than I do today that inflation is indeed beginning to head higher” before raising rates, adding that “regardless of the exact date for liftoff, I think it could well be appropriate for the funds rate to still be under 1 percent at the end of 2016.”

Fed Chair Janet Yellen is expected to reinforce the possibility of a decision to increase the central bank’s benchmark federal funds rate at the FOMC’s Dec. 15-16 meeting when she gives her outlook for the economy on Wednesday in a speech in Washington. The next day she’s scheduled to testify before Congress’s Joint Economic Committee, where she’ll deliver a statement and answer questions from lawmakers.

The US dollar tumbled below its 100 perch to trade at 99.89 last evening but recovered a bit on Wednesday morning to reach 99.96. There has been a rash of disappointing US data over the past days, but nothing upsetting except for the drop in manufacturing which could be an anomaly. The closely watched ISM survey prompted investors to trim some of their bullish dollar positions. The index fell to 48.6 as the sector buckled under the weight of a strong greenback and deep spending cuts by energy firms.

Against the yen, the dollar inched up to 123.03 yen moving back toward Monday’s high of 123.34. It has been trading in a tight against its Japanese peer since hitting a three-month high of 123.77 just weeks ago. The embattled euro edged down 0.1 per cent to $1.0617, with Monday’s 7-1/2-month trough of $1.0557 in sight ahead of the European Central Bank’s policy review on Thursday, at which investors widely expect the bank to unveil fresh stimulus measures.

The Aussie rose as far as a seven-week high of 0.7345 early in the session after GDP data printed better than forecast. The kiwi traded just under 67 US cents its highest since early November, supported by rising global dairy prices. It was last down about 0.2 per cent at $0.6666.