The euro slid to a three-week low at $1.0782 and was down 0.36% as the dollar rose
The dollar rallied on Thursday after declining the previous day as central banks continued to roil currency markets, while sterling hit a three-week low ahead of a Bank of England decision.
The dollar index was 0.29% higher at 104.35. It declined 0.4% the previous day after the Fed held rates steady but opened the door to reducing borrowing costs in September.
Chris Turner, head of global markets at ING, said geopolitical tensions and a slowing global economy were likely supporting the dollar, a traditional safe haven for investors at moments of stress, even with the Fed heading for rate cuts.
The geopolitical and the macro environment elsewhere in the world isn’t actually great, he added. Obviously we have still got some real tensions in the Middle East, and the manufacturing sector is seemingly in recession across large parts of Europe and in Asia.
The euro slid to a three-week low at $1.0782 and was down 0.36% as the dollar rose.
Investors’ positioning ahead of a possible BoE rate cut later in the day was knocking the pound, spilling over to other currencies and supporting the dollar, according to Lee Hardman, currency strategist at MUFG.
Japan’s yen was roughly flat, with the dollar at 149.87 yen.
The yen climbed nearly 1.8% the previous day after the Bank of Japan raised rates for a second time this year. It soared 7.3% in July, its strongest monthly performance since November 2022, after starting the month near 38-year lows.
Intervention by Japanese authorities to boost the currency began the move higher, combining with a narrowing of the U.S.-Japan interest rate gap to trigger an unwind of profitable carry trades, in which traders borrow the yen at low rates to invest in dollar-priced assets for higher returns.
