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Dollar edges back after 9-day backlash as pound makes big rally

Devdiscourse News Desk
Updated: 14-03-2019 06:24 IST
Dollar edges back after 9-day backlash as pound makes big rally

Image Credit: Pixabay

The dollar edged back from a nine-day low early on Thursday, as a big rally by the pound made on Brexit relief tapered off and gave the greenback some reprieve. The dollar index, a gauge of the currency's strength against six major counterparts, stood little changed at 96.505. It shed 0.4 per cent overnight, at one point brushing a nine-day trough of 96.385.

The greenback had taken a knock as the pound rallied more than 2 per cent after British lawmakers voted against a potentially disorderly "no-deal" departure from the European Union late. Sterling was down 0.4 per cent at $1.3285 after going as high as $1.3380 the previous day, its strongest since June 2018.

"The pound has already made a lot of ground, and since its gains are mostly generated by expectations rather than fundamentals, its current rally looks to have run its course," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. British lawmakers are now widely expected to vote on Thursday to delay Britain's departure from the EU, currently scheduled for March 29.

"Once expectations for a delayed exit from the EU are confirmed after tonight's vote in parliament, the pound could face more pressure. But the dollar has been weakened by declining U.S. yields and any reprieve for the currency is likely to be limited." The dollar was a shade higher at 111.25 yen after losing 0.2 per cent the previous day.

The U.S. currency has declined steadily from a 2-1/2-month peak of 112.135 marked early last week, with long-term Treasury yields having declined to their lowest level since the beginning of January. The euro was steady at $1.1331 after advancing 0.3 per cent overnight.

The Australian dollar was down 0.2 per cent at $0.7081 , handing back the previous day's modest gains. The immediate focus for the Aussie was on Chinese activity data such as industrial output, investment and retail sales due at 0200 GMT. The figures may give some clues on whether a spate of government support measures are starting to work their way through the cooling economy, which could brake its expected decline.

The antipodean currency is sensitive to economic conditions in China, Australia's major trading partner.

(With inputs from agencies.)