NEW YORK (Reuters) - The dollar dropped against a basket of currencies on Tuesday, a day before the Federal Reserve was due to conclude its latest two-day policy meeting and as investors rebalanced portfolios ahead of the end of the month.
Investors will be watching to see if the U.S. central bank gives any clues on its likely future path after it responded to the economic devastation of the novel coronavirus outbreak by slashing interest rates, resuming bond-buying and backstopping credit markets.
Central bank meetings this week and rebalancing for month-end will make it difficult to read market moves in the coming days, said Mark McCormick, global head of FX strategy at TD Securities in Toronto.
“We wouldn’t draw too many conclusions about the state of the currency market over the next few sessions given the mingling of policy and technical drivers,” McCormick said.
Month-end rebalancing is negative for the greenback, with the U.S. dollar likely to be sold against the euro, sterling, the Japanese yen and the Australian dollar, he said.
The dollar index =USD fell 0.423% to 99.85. It has risen from 99.00 at the end of March.
The Australian dollar AUD= jumped 0.56% to $0.6500 after earlier reaching $0.6514, the highest since March 11.
The greenback gave back some earlier losses as stocks came off their highs on concerns that the coronavirus could spread further than previously thought if businesses are reopened prematurely.
Optimism that countries across the globe are getting closer to reopening their economies has cheered stocks this week and reduced demand for the greenback. [.N]
The Swedish crown jumped against the dollar and euro after Sweden’s central bank held interest rates steady and maintained stimulus measures designed to support an economy battered by the coronavirus pandemic.
The greenback fell 1.16% to 9.8805 crowns SEK=, after earlier getting as low as 9.8527, the lowest since March 30.
With Sweden facing its worst downturn since World War Two, investors had watched closely for any sign the Riksbank would push rates back below zero after it became the first central bank to ditch a negative interest rate policy late last year.
But the Riksbank left its benchmark rate at 0%, as expected, with its governor saying a rate cut would not solve Sweden’s economic problems.
“It’s hard not to see this as a bit hawkish - you’d think that if they didn’t cut rates now, when would they cut?” said Morten Lund, FX strategist at Nordea, adding that he expected rates to remain steady this year and next.
The European Central Bank (ECB) will also meet on Thursday.
Additional reporting by Tom Wilson in London; Editing by Paul Simao