Dollar slips on dovish Fed remarks, China hopes help euro
By Harry Robertson and Tom Westbrook
LONDON/SINGAPORE (Reuters) -The euro strengthened as the dollar slid on Tuesday in reaction to a sharp drop in Treasury yields on the back of further dovish comments by Federal Reserve officials, as well as the prospect of stimulus from China.
The dollar index slid and Treasury yields edged lower after Atlanta Fed President Raphael Bostic, in the latest comments this week by Fed speakers, said the U.S. central bank does not need to increase interest rates any further.
Bostic told the American Bankers Association that Fed policy is sufficiently restrictive and that he sees no recession ahead even as the Fed's rate hikes slow the economy and bring down inflation.
«The focus on term yields and term premiums is going be a key issue for the U.S. dollar because it does suggest that maybe the Fed doesn't have to go any more,» said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. «These are all things that are going to check the dollar's advance, whether we see any sort of significant decline at this point, it's hard to say given where yields are,» he said.
The euro rose 0.25% against the dollar to $1.0595, while the dollar index, a measure of the U.S. currency against six others, slid about 0.05% to 105.90, below last week's 11-month high of 107.34, after earlier touching the lowest level this month.
Traders are waiting for the release on Wednesday of minutes from the Fed's last policy move as well as key U.S. inflation data on Thursday. Investors are keeping a close eye on the conflict between Israel and the Palestinian Islamist group Hamas, though the initial safe-haven purchase of the dollar has stopped.
Bloomberg reported that China is weighing the issuance of at least 1
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